Opinion
20-P-1010
04-25-2022
FORTY PINE, LLC v. COUNTRY BANK FOR SAVINGS.
MEMORANDUM AND ORDER PURSUANT TO RULE 23.0
This is the second appeal in this matter, which arose from breaches of a commercial promissory note by both parties to that note. Forty Pine, LLC breached the note by transferring its ownership of certain property without prior approval by Country Bank for Savings (bank). The bank breached the note by accelerating it in response and "assessing a prepayment premium including legal fees and costs" (prepayment premium). Forty Pine sued and the bank counterclaimed. Initially, the bank prevailed on Forty Pine's claims against the bank as well as the bank's own claim for breach of contract. An award of damages entered in the bank's favor (original judgment). By this point, the bank had ceased pursuing the prepayment premium and instead sought and was awarded default interest, which was approximately twenty times more. Forty Pine paid the original judgment, stopping the accumulation of postjudgment interest, and appealed. In the first appeal, a panel of this court reversed the original judgment as to Forty Pine's breach of contract claim, concluding that the bank was liable for breach of contract for assessing the prepayment premium, and remanded the matter "for a reassessment of the amount of damages." Elsewhere, the panel described the remand as one "for a recalculation of the amount of damages," which was the language repeated in the rescript. Forty Pine, LLC v. Country Bank for Savings, 95 Mass. App. Ct. 1108 (2019) (Forty Pine I ). The original judgment was "otherwise affirmed." See id. at 1109.
The "rescript" means the appellate court's order, direction, or mandate to the lower court disposing of the appeal. Mass. R. A. P. 1 (c), as amended, 487 Mass. 1601 (2021).
The bank argues that on remand the Superior Court exceeded its authority by conducting a damages hearing on Forty Pine's breach of contract claim, making new findings of fact, and entering a new judgment payable to Forty Pine. The bank also raises questions of mitigation and whether the bank can be liable for Forty Pine's loss of use of funds based on Forty Pine's payment to the bank in accordance with the original judgment. We discern no error of law or erroneous findings of fact and affirm the assessment of damages to Forty Pine.
Background. The facts pertaining to this dispute are set out in full in Forty Pine I; the following is a summary of the facts relevant to this appeal.
1. The original judgment and payment. It was undisputed that Forty Pine's transfer of its ownership and ownership of two acres of property to James Malandrinos breached a provision of the mortgage requiring the bank's prior approval for such actions. Accordingly, in 2016, a judge of the Superior Court (motion judge) issued an order granting summary judgment on all claims for the bank. The motion judge ordered dismissal of Forty Pine's breach of contract claim as well as its c. 93A claims. The motion judge also allowed the bank's motion for summary judgment on its counterclaim for breach of the mortgage, an order that Forty Pine did not challenge in the first appeal.
The motion judge also ordered dismissal of Forty Pine's claim for a declaratory judgment.
On March 1, 2017, after the entry of the order granting summary judgment and before the original judgment entered, Forty Pine made a principal payment of $228,781.75. The bank did not negotiate the check until on or after July 21, 2017.
After a hearing on the bank's damages for Forty Pine's breach of the mortgage, on June 8, 2017, a second Superior Court judge awarded damages to the bank in the amount of $393,687.58, which consisted of principal owed of $228,781.75; accrued interest through December 6, 2012, of $826.15; default interest from December 7, 2012, through October 14, 2016, of $102,900.94; legal fees of $58,112.50; and costs of $3,066.23. Though the gravamen of the dispute between the parties was the prepayment premium, the bank dropped its claim for and was not awarded the prepayment premium. Instead, the bank was awarded the significantly more lucrative default rate of interest set forth at G. L. c. 231, § 6C. With the addition of prejudgment interest from June 8, 2017, to June 15, 2017, in the amount of $765.77, to the $393,687.58 damage award, the original judgment entered in the amount of $394,453.35. The balance of the original judgment on June 15, 2017, after subtraction of the principal payment of $228,781.15 by Forty Pine on March 1, 2017, was $165,671.59.
Forty Pine elected to pay the original judgment in full while it appealed. By letter dated July 13, 2017, Forty Pine's attorney, Michael Parker, asked the bank's attorney, Tani Sapirstein, for the bank's calculation of the amount needed to satisfy the original judgment. On July 20, 2017, Sapirstein responded by letter. Sapirstein added postjudgment interest through July 21, 2017, in the amount of $4,671.90, to the entire original judgment amount of $394,453.34, even including the principal Forty Pine had paid prior to entry of that judgment. After applying the principal paid as well as payments of $2,450 made by Forty Pine in each of June and July 2017, Sapirstein concluded that, as of July 21, 2017, the outstanding balance on the original judgment was $165,443.50 "plus continuing interest."
During the pendency of the litigation, Forty Pine made monthly installment payments from December 2012 through July 2017, all of which the bank returned, with the exception of the two payments made after entry of the original judgment.
On July 26, 2017, Forty Pine paid to the bank $165,743.50, which was the amount calculated by the bank ($164,443.50 "plus continuing interest" of $300 that accrued after July 21, 2017). The bank then took an additional $937 it had been holding in escrow for payment of real estate taxes. In total, Forty Pine paid $400,362.25 on the original judgment.
The bank did not issue a discharge of the mortgage until May 30, 2019, nearly two years later, following both the issuance of the rescript in Forty Pine I and the denial of Forty Pine's motion for reconsideration.
2. The first appeal. Forty Pine appealed from the original judgment, claiming error in the motion judge's order for dismissal of its breach of contract claim and its claims under c. 93A. It also challenged the damages awarded to the bank. As already explained, a different panel of this court "reverse[d] the judgment as to Forty Pine's breach of contract claim, and remand[ed] for a reassessment of the amount of damages." Forty Pine I, Mass. App. Ct., No. 18-P-307, slip op. at 14-15 (April 22, 2019). The panel applied the general rule that "[a] prepayment premium does not attach when a loan is accelerated because the act of the acceleration advances the maturity of the debt; the debt becomes immediately due and payable."Id. at 7.
Because Forty Pine failed to show that either of the c. 93A claims rose beyond a good faith contractual dispute, the panel held that there was no error in the dismissal of those counts. The panel also rejected Forty Pine's argument that the bank's nonacceptance of Forty Pine's monthly installment payments on the note constituted a failure to mitigate damages. The panel then stated, "[t]he amount of damages will need to be recalculated, however, given our determination here that, as asserted in count II of Forty Pine's complaint, the bank breached the note by assessing a prepayment premium including legal fees and costs." Forty Pine I, Mass. App. Ct., No. 18-P-307, slip op. at 14. The panel "remand[ed] th[e] matter to the Superior Court for a recalculation of the amount of damages in accordance with this memorandum and order"; the original judgment was "otherwise affirmed." Id. at 14-15.
3. Forty Pine's motion for reconsideration. Forty Pine moved in this court for "reconsideration or modification" of the panel's decision. Forty Pine's motion foreshadowed the conflict that was to come over the scope of the remand order in Forty Pine I. Forty Pine's motion stated that the panel had "remanded the matter for the purpose of a new hearing on damages." The bank argued that the panel in Forty Pine I did not order a new hearing. Forty Pine also contended that the recalculation of damages "is to be conducted under [the Appeals] Court's instruction that damages be recomputed in light of Country Bank's breach to remove those sums, including legal fees and costs, demanded in breach of the note." Forty Pine asked that "the Trial Court should be instructed not only to reduce the award to exclude the prepayment penalty and attendant costs, but to also strike the award of interest at both the contract rate and default rate." The panel denied the motion to reconsider by margin endorsement.
4. Proceedings on remand. After thoughtful consideration of the rescript, the judge on remand, a third Superior Court judge (remand judge), recognized that Forty Pine's breach of contract claim was "alive" and ordered a "damages only" evidentiary hearing to establish "what damages, if any, flow from it." An evidentiary hearing was held before a fourth judge (hearing judge), for the purpose of expanding the record, finding new facts, and assessing damages in favor of Forty Pine. In an order for judgment issued after the evidentiary hearing, the hearing judge also concluded that the rescript entitled Forty Pine to establish damages. Forty Pine claimed entitlement to four categories of damages in order to place it in the position it would have been in if the bank had not demanded the prepayment penalty and prelitigation fees: (1) amounts awarded and paid to the bank; (2) overpayment of the original judgment retained by the bank; (3) interest to compensate Forty Pine for the loss of use of funds that it had paid to the bank and funds held in escrow by TD Bank; and (4) attorney's fees. The hearing judge's order for judgment following remand addressed each of the four categories of damages. The hearing judge found that (1) Forty Pine did not fail to mitigate its damages; (2) Forty Pine was entitled to an award of damages in the amount of its overpayment to the bank; (3) Forty Pine was entitled to prejudgment interest pursuant to G. L. c. 231, § 6C on the award and the amounts held in escrow at TD Bank; and (4) Forty Pine was not entitled to an award of attorney's fees. A judgment for damages payable to Forty Pine entered in the amount of $413,097.62. The bank appealed. Forty Pine cross appealed the judgment to the extent that the judge did not award it attorney's fees and costs.
The order for judgment contains a scrivener's error that is of no moment. After referring to the fact that "the plaintiff is entitled to establish damages," it states, "Country Bank is entitled to establish damages, if any, that it incurred because of Country Bank's breach." The order then awards damages to Forty Pine.
Malandrinos initially paid for the warehouse expansion that drove him to acquire Forty Pine in the first place and, once construction was complete, sought to finance the construction with TD Bank. As a condition of that financing, and due to the outstanding Country Bank mortgage, TD Bank required Malandrinos to escrow sufficient funds to pay Country Bank in full. The escrow, held by TD Bank, was initially funded on July 26, 2013, in the amount of $250,000. An additional $15,000 was added to the escrow account on January 2, 2014.
Discussion. 1. Scope of the remand. The bank argues that the remand judge and hearing judge exceeded the direction of the rescript in Forty Pine I by ordering and holding, respectively, an evidentiary hearing for the purpose of determining the damages Forty Pine suffered as a result of the bank's breach of the promissory note. The judges’ actions, the bank contends, were inconsistent with the decision to remand for a "recalculation" of damages and otherwise affirm the judgment. The bank also contends that the remand judge and hearing judge failed to respect the finality of the original judgment on the bank's counterclaim for breach of contract, which was affirmed. The bank argues that the two judges instead should have simply confirmed that the damages awarded to the bank did not contain the prepayment premium. We disagree.
If all that had been necessary was a determination that the original judgment did not contain the prepayment premium, this court would have been able to make that determination. Instead, the decision in Forty Pine I revived Forty Pine's breach of contract claim. Because Forty Pine had never had a chance to prove its damages, it was entirely proper for the remand judge to order and the hearing judge to hold an evidentiary hearing to allow Forty Pine to offer evidence of its damages, and for the hearing judge to make findings of fact. Nagle's Case, 310 Mass. 193, 197-198 (1941) ; Long v. George, 296 Mass. 574, 577 (1937). The only limitation was that the court could not reach a result contrary to the rescript. City Coal Co. of Springfield v. Noonan, 434 Mass. 709, 712 (2001). The damages that Forty Pine suffered, which included paying money it did not owe because of the bank's breach, necessarily implicated the damages awarded to the bank. That is why the matter had to be remanded. There was no error by the remand judge, and the hearing judge acted within his authority on remand to "adapt the decree finally entered to the needs of the case in order to adjust correctly the rights of the parties." Day v. Mills, 213 Mass. 585, 587 (1913).
The bank argues that the panel's denial of Forty Pine's motion for reconsideration somehow constituted a decision that Forty Pine was not entitled to a damages hearing. This is not correct. The rescript, the statement of the panel's position on the legal issues in Forty Pine I, see Ford v. Flaherty, 364 Mass. 382, 387-388 (1973), was not affected by the denial of reconsideration. See Acme Plastering Co. v. Boston Hous. Auth., 25 Mass. App. Ct. 985, 986 (1988) (denial of motion for reconsideration not decision on merits).
2. Mitigation of damages. The bank argues that even if the new judgment for damages payable to Forty Pine was authorized by the rescript, the hearing judge erred by excusing Forty Pine from its duty to mitigate its damages based on findings of fact that were contradicted by the evidence. Specifically, the bank challenges two findings of fact central to the assessment of damages.
"[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 the credibility of the witnesses" (citation omitted). Building Inspector of Lancaster v. Sanderson, 372 Mass. 157, 160 (1977). "A finding is ‘clearly erroneous’ when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed." Id., quoting United States v. United States Gypsum Co., 333 U.S. 364, 395 (1948).
The bank first challenges the finding that the bank "did not offer to discharge the [m]ortgage on the [p]roperty upon receipt of the principal and accrued interest." This finding is not clearly erroneous. In the correspondence between the parties in November and December 2012, the relevant time frame for the challenged finding, the bank did not offer to discharge the mortgage on the property. The letters that the bank relies on to challenge the finding of fact are dated January and February 2013, after the time relevant to this finding. In any event, they do not undermine the finding. Sapirstein's January 8, 2013, letter, merely states that she "believe[s] that the [b]ank would be agreeable to issuing a discharge," not that it was offering one. By February 2013, the parties agreed to settle the dispute with the bank providing a discharge, but when Sapirstein sent a settlement agreement, she included additional terms and conditions that had not been negotiated.
Indeed, even after Forty Pine paid the principal balance and interest on the original judgment in full, the bank did not discharge the mortgage until after the rescript issued in Forty Pine I, which was on April 22, 2019.
The bank also challenges the finding that, "[b]ut for [the bank]’s breach of the [n]ote, no interest would have accrued either at the contract rate or default rate after December 6, 2012." The bank fails to recognize, however, that this is a conclusion that rests on the finding that, had the "[b]ank not insisted upon the prepayment penalty and legal expenses, [the bank] would have been paid the sums actually due under the [n]ote on or before December 6, 2012." Review of the parties’ correspondence demonstrates that this finding is correct. Indeed, by November 20, 2012, Malandrinos had escrowed the funds with his lawyer, and his lawyer so notified the bank. The bank's claim that it stood ready to accept the payment of the undisputed principal and interest is belied by the bank's insistence on numerous additional terms in the draft settlement agreement. It also misses the point that it was the bank that was contending the note was accelerated and not accelerated. The question was, who was at fault for not narrowing the dispute to just the prepayment premium? The hearing judge on remand assessed the evidence and determined that it was the bank that was at fault. Nothing in this record causes us to conclude a mistake has been committed on this point.
The bank argues that "Forty Pine has parlayed a minor good-faith dispute over a prepayment penalty and pre-litigation fees totaling $5,875.54 into a substantial windfall." The bank overlooks that it also attempted to parlay that so-called minor good-faith dispute into an award of default interest of over $100,000.
The bank also argues that Forty Pine should have tendered the accelerated principal and interest in December 2012 and its failure to do so violated the general rule "that a plaintiff may not recover for damages that were avoidable by the use of reasonable precautions on his part." Burnham v. Mark IV Homes, Inc., 387 Mass. 575, 586 (1982). What the bank fails to appreciate is that the question is what was reasonable in the circumstances. Makino, U.S.A., Inc. v. Metlife Capital Credit Corp., 25 Mass. App. Ct. 302, 319 (1988). Here, the bank asserted two contrary positions even through summary judgment -- that the bank had accelerated the note and that the note was not accelerated. "A person whose wrong forces a choice between reasonable but potentially hazardous courses cannot be heard to complain about the wronged party's selection. That selection enjoys wide latitude and is to be respected so long as it is not irrational." Id. Forty Pine escrowed approximately the amount of the loan and tendered monthly payments, which the bank rejected, throughout the litigation and until judgment. Having forced the choice, the bank cannot now be heard to complain.
3. Loss of use of funds. The bank argues that the hearing judge erred in awarding damages for Forty Pine's loss of use of funds based on payments Forty Pine made on the original judgment. It cites no case law for this proposition. In any event, the thrust of its argument is that it was the Superior Court, not the bank, that made a wrongful assessment of damages. It was the bank, however, that breached its contract and pursued funds that it was not owed, causing Forty Pine to incur damages. While the Superior Court accepted the bank's theory until a panel of this court reversed, the bank was the architect of its own receipt of the funds. The bank then had the use of those funds and Forty Pine suffered the loss of use of those funds until the judgment after remand. The bank, content to allow pre and postjudgment interest to accrue while it was the beneficiary of those sums, cannot now complain it is merely being required to return the sums it incorrectly received along with statutory interest. G. L. c. 231, § 6C ; Sterilite Corp. v. Continental Cas. Co., 397 Mass. 837, 841-842 (1986), quoting Perkins Sch. for the Blind v. Rate Setting Comm'n, 383 Mass. 825, 835 (1981) (" G. L. c. 231, § 6C, ‘is designed to compensate a damaged party for the loss of use or unlawful detention of money’ "; the goal is to preserve "the principle of restoring to the party only that which he has lost"). See Cohen v. Murphy, 368 Mass. 144, 146 (1975) ("When a judgment which has been satisfied by the judgment debtor's paying money is reversed, he is entitled to restitution of the amount which he has lost"). See also Stevens v. Fitch, 11 Met. 248 (1846) (judgment amount may be recovered after satisfaction when judgment is reserved or vacated).
In light of our ruling, we deny the bank's request for attorney's fees and costs for this appeal.
4. Forty Pine's cross appeal. Forty Pine argues that it was an abuse of discretion for the hearing judge to fail to award Forty Pine attorney's fees and costs. Forty Pine's request is not based on the contract or on a statute or court rule authorizing fees. Rather, Forty Pine argues that it was the bank's breach of the note that caused the litigation and that the bank behaved in a needlessly oppressive manner. Though this dispute and subsequent litigation may have become a game of brinkmanship and with a decade of hindsight it may now look ill-advised, we discern no abuse of discretion in the decision of the hearing judge to decline to award fees and costs. And while the way the case was litigated did cause Forty Pine to suffer a loss of use of funds, the hearing judge's award of damages compensated Forty Pine for that loss.
Forty Pine's request for attorney's fees and costs for this appeal is denied.
Conclusion. The judgment of the Superior Court entered on June 17, 2020, is affirmed.
So ordered.
Affirmed