Opinion
14-P-155
03-02-2015
HICHAM ALI HASSAN, trustee, v. SUGAR HEAVEN, INC., & 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
Hicham Ali Hassan appeals from the entry of summary judgment in favor of the defendants Sugar Heaven, Inc., David Sapers, Boston Total Sugar, LLC (Boston Sugar), and Dedham Total Sugar, LLC (Dedham Sugar), on Hassan's claims for fraud. We reverse.
Background. "Reviewing the materials submitted for the summary judgment motion in the light most favorable to the nonmoving party [Hassan], we recite the following facts." Blare v. Husky Injection Molding Sys. Boston, Inc., 419 Mass. 437, 438 (1995) (quotation omitted).
Hassan and Sapers, on behalf of Sugar Heaven, Inc., executed a commercial lease for property located at 218 Newbury Street in Boston. Sapers did not personally guarantee the lease. Sugar Heaven, Inc. operated a candy store on the premises under the name of "Sugar Heaven," until approximately 2007 when it defaulted under the lease. Hassan sued Sugar Heaven, Inc. and obtained a judgment in his favor. In February, 2009, Sapers formed Dedham Sugar "to operate a store in Dedham, Massachusetts." On March 27, 2009, Hassan obtained an execution against Sugar Heaven, Inc. in the amount of $50,395.84. Sugar Heaven, Inc. never paid on the judgment or the execution.
On July 13, 2004, Sugar Heaven, Inc. registered with the United States Patent and Trademark Office the trademark "Sugar Heaven."
On April 3, 2009, Sapers on behalf of Sugar Heaven, Inc. executed an assignment for the benefit of creditors (assignment). On April 17, 2009, the assignee sent notice of the assignment to Sugar Heaven, Inc.'s creditors, including Hassan. The letter stated that, "[b]ased on information provided to [the assignee] by [Sugar Heaven, Inc.], [Sugar Heaven, Inc.'s] assets consist of store equipment and inventory." The letter asked creditors to complete and return a form in order to participate in distributions from the assignment, but Hassan did not reply.
Dedham Sugar purchased the assets of Sugar Heaven, Inc. by check signed by Sapers and dated April 30, 2009. On May 28, 2009, the assignee sent consenting creditors an appraisal "of the physical assets of the company." The appraisal indicated a value of less than $5,000. The assignee advised consenting creditors that he had "received an offer to purchase these assets along with the name, goodwill, phone number and intellectual property (of which there appears to be none) of Sugar Heaven, Inc. from Dedham Total Sugar, LLC for a purchase price of $15,000." The letter disclosed that the principal of Dedham Sugar was also a principal of Sugar Heaven, Inc. Hassan never received the May 28, 2009, letter.
Sapers formed Boston Sugar in July, 2009. Dedham Sugar opened a store and began operating in October, 2009, with Boston Sugar following suit in March, 2010. Both stores operate under the trademark "Sugar Heaven," but Boston Sugar has never paid to use the trademark.
On May 7, 2010, Sapers as president of Sugar Heaven, Inc. assigned the trademark "Sugar Heaven" to Sugar Heaven Enterprises, LLC. On July 8, 2010, Sapers as president of Sugar Heaven, Inc. assigned the trademark to Dedham Sugar. That same day, Sapers as manager of Dedham Sugar assigned the trademark to Sugar Heaven Enterprises, LLC. Each of the assignments of the trademark recited a consideration of one dollar.
Another entity owned and controlled by Sapers.
On April 9, 2012, Hassan instituted the present action alleging fraud, deceit, misrepresentation, and violation of G. L. c. 93A, and seeking injunctive relief. Hassan also sought to pierce the corporate veil of Sapers's entities. Counsel for Hassan sent discovery demands on May 25, 2012, and received answers to interrogatories and requests for admissions in July and August. The only documents produced were those contained in the assignee's file on the assignment. In September, 2012, the defendants moved for summary judgment. Counsel for Hassan submitted an affidavit in opposition to the motion, stating that he had noticed but not yet taken depositions of Sapers and his companies because he was awaiting documents responsive to his requests. He further stated that Hassan could not present facts essential to justify his opposition, "[b]ecause of the defendants' failure to provide complete answers to interrogatories and responses to requests for production of documents."
Discussion. We first dispose of the issue regarding Hassan's failure to assent as required by the assignment and G. L. c. 203, §§ 40-41. While this failure prevents Hassan from sharing in the distribution, Strasnick v. Cinamon, 282 Mass. 97, 100 (1933), and cases cited, it does not prevent him from challenging the validity of the assignment itself. Accordingly, he has not waived any rights with respect to this appeal.
We review a grant of summary judgment de novo. Miller v. Cotter, 448 Mass. 671, 676 (2007). "The purpose of the statute for the settlement of estates of insolvent persons is . . . to enable honest, unfortunate debtors to obtain a discharge from their debts." Flagg v. Reed, 157 Mass. 468, 470 (1892). Hassan alleges that Sapers was not an honest debtor, and that he fraudulently withheld the trademark from the assignment. Such claims are inappropriate for summary judgment, as "the question of fraud is one of fact." Brown v. Little, Brown & Co., 269 Mass. 102, 117 (1929). See USTrust v. Henley & Warren Mgmt., Inc., 40 Mass. App. Ct. 337, 342 (1996).
Moreover, the record demonstrates a genuine dispute over whether the assignment included the trademark. Sapers claims that it did, but also asserts that he "was not involved personally in the sale" of the assets to Dedham Sugar. It is undisputed that the assignee's information regarding the assets came from Sapers, and that Sapers never submitted an affidavit required by G. L. c. 203, § 41, that the assignment included all of Sugar Heaven, Inc.'s assets. "[A] fair-minded jury" could conclude that the trademark is valuable, Flesner v. Technical Communications Corp., 410 Mass. 805, 809 (1991), based on the undisputed facts that Sapers purchased the assets for $10,000 more than their stated value and continues to operate two stores under that trademark. If it was valuable, the trademark should have been included in the assignment as a matter of law. See G. L. c. 203, § 41; Warren v. Warren Thread Co., 134 Mass. 247, 249 (1883). Sapers could not assign the trademark from Sugar Heaven, Inc. to his other entities if it was included in the assignment, see Blish v. Harlow, 15 Gray 316, 319 (1860) (assignee of insolvent debtor "acquires the legal title to all the real as well as personal estate of the insolvent"), but it is undisputed that he did so. It therefore "is possible that the statement [that Sugar Heaven, Inc. had no intellectual property of value] could be found to be a false statement of fact[, and i]f [Hassan] is able to establish that the [assignment was invalid due to fraud or deceit], he may be entitled to some recovery under [G. L.] c. 93A." Sheehy v. Lipton Indus., Inc., 24 Mass. App. Ct. 188, 192, 195 (1987).
This assertion is doubtful in light of the undisputed facts that Sapers owns and controls both entities; that he personally signed the offer to purchase Sugar Heaven, Inc.'s assets; and that he personally signed the check from Dedham Sugar.
Finally, summary judgment should not have been allowed because discovery was not complete. Summary judgment may be granted "if the pleadings, depositions, answers to interrogatories, and responses to requests for admission . . ., together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law"; however, the judge may deny the motion and order a continuance "[s]hould it appear from the affidavits of a party opposing the motion that he cannot for reasons stated present by affidavit facts essential to justify his opposition." Mass.R.Civ.P. 56(c) and (f), 365 Mass. 824 (1974). Counsel for Hassan represented by affidavit that he could not present sufficient facts to justify his opposition because the defendants' answers to interrogatories were nonresponsive and the defendants had not submitted to noticed depositions. Counsel stated that he had not received documents responsive to his discovery demands, and that counsel for Sapers indicated he would provide nothing further absent a court order. This is not a case where the plaintiff failed to pursue discovery, contrast Godbout v. Cousens, 396 Mass. 254, 262 n.11 (1985) (rejecting argument that summary judgment was premature because plaintiff sent late interrogatories, did not attempt to explain lack of diligence, and did not notice depositions in eighteen months between filing of complaint and defendants' motion for summary judgment); Anzalone v. Administrative Office of the Trial Ct., 457 Mass. 647, 653 (2010) (no error in judge's denial of additional discovery where plaintiff "chose to forgo discovery for almost four months while the motion for judgment on the pleadings or alternatively for summary judgment was pending"), and the judge should not have rewarded Sapers's evasion of his duties under Mass.R.Civ.P. 26, as amended, 423 Mass. 1401 (1981), by prematurely entering summary judgment in his favor.
For example, in response to the interrogatory, "Please set forth in complete detail how [Dedham Sugar] secured payment for the purchase of the trademark 'Sugar Heaven,'" Dedham Sugar stated: "[Dedham Sugar] objects to this request in its entirety. The information is not relevant and is not likely to lead to the discovery of admissible evidence. The information requested is also confidential and private. Further answering, [Dedham Sugar] states that it never had any relationship whatsoever with Sugar Heaven, Inc., other than to purchase its assets following the Assignment for the Benefit of Creditors."
In response to a request to identify all accounts that Sugar Heaven, Inc. "has or ever has had since March 4, 2003," including the identity of each bank, the name of the account, the identity of those with access to and signatory power on the account, and whether the account is still open, Sapers stated: "Sugar Heaven, Inc. always maintained its own separate accounts; no other individual or business shared those accounts; and Sugar Heaven, Inc. never had any relationship whatsoever with [Boston Sugar] or [Dedham Sugar], other than that [Dedham Sugar] purchased the assets of Sugar Heaven, Inc. following its Assignment for the Benefit of Creditors, and the file for the Assignment for the Benefit of Creditors will be produced."
When asked to identify all real, personal, tangible and/or intangible property that Sugar Heaven, Inc. owned, leased or rented from March 3, 2004, to the present, Sapers objected and stated: "The information is not relevant and is not likely to lead to the discovery of admissible evidence. Further answering, David Sapers states that Sugar Heaven, Inc. sold its assets following its Assignment for the Benefit of Creditors, and the file for the Assignment for the Benefit of Creditors will be produced."
Judgment reversed.
By the Court (Rubin, Milkey & Carhart, JJ.),
The panelists are listed in order of seniority.
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Clerk Entered: March 2, 2015.