Opinion
No. 06-1276.
January 7, 2008.
MEMORANDUM OF DECISION AND ORDER ON DEFENDANTS IN CROSS-CLAIM'S MOTION FOR PARTIAL SUMMARY JUDGMENT INTRODUCTION
The defendants in cross-claim, James Bell and Carolyn Bell (Bells), and the plaintiffs in cross-claim, Scott Bonarrigo and Francis Bonarrigo (Bonarrigos), were involved in a residential renovation project in Newburyport, Massachusetts. The precise nature of their relationship is at issue. The Bells move for partial summary judgment on Count I, the G.L. c. 93A cross-claim by the Bonarrigos. Finding that there is no issue of material fact as to whether the Bells and Bonarrigos participated in a joint venture, and that a joint venture is not subject to a G.L. c. 93A claim, the court allows the motion for partial summary judgment.
The Bells do not raise any issue as to Francis Bonarrigo's participation in the business although he was not mentioned in the agreement.
BACKGROUND
In 2004, James Bell and Scott Bonarrigo discussed the possibility of acquiring, renovating, and selling a residential property. The Bells and Bonarrigos identified 27 Moseley Avenue, Newburyport (property or Moseley property), a single family home, and made an offer that was accepted. Carolyn Bell and Scott Bonarrigo then purchased the property and took title. Scott Bonarrigo financed the purchase with a loan.
Carolyn Bell and Scott Bonarrigo put the oral agreement of the Bells and Bonarrigos in writing several weeks after the closing. James Bell and Francis Bonarrigo were not mentioned in the written agreement, nor did they sign it, although both James Bell and Francis Bonarrigo were involved in the project even before the property was identified.
Renovation work began several months later. Donald Madore (Madore) worked on the property. Toward the end of the project disputes developed between the Bells and Bonarrigos, and between the Bells and Madore. The property was first marketed for more than $800,000 and on September 13, 2006, the Bells and Bonarrigos sold the property for $575,000.
DISCUSSION
A. Summary Judgment Standard
Summary judgment will be granted where there are no genuine issues as to any material fact and where the moving party is entitled to judgment as a matter of law. Mass. R. Civ. P. 56 (c); Cassesso v.Comm'r of Corr., 390 Mass. 419, 422 (1983); Cmty. Nat'l Bank v.Dawes, 369 Mass. 550, 553 (1976). The moving party bears the burden of affirmatively demonstrating the absence of a triable issue, and that the summary judgment record entitles the moving party to a judgment as a matter of law. Pederson v. Time, Inc., 404 Mass. 14, 16-17 (1989). The moving party may satisfy this burden either by submitting affirmative evidence that negates an essential element of the opposing party's case or by demonstrating that the opposing party has no reasonable expectation of proving an essential element of his case at trial.Flesner v. Technical Commc'ns Corp., 410 Mass. 805, 809 (1991);Kourouvacilis v. Gen. Motors Corp., 410 Mass. 706, 716 (1991).
When a party has made and properly supported a motion for summary judgment, "an adverse party may not rest upon the mere allegations or denials of his pleading, but his response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial." Mass. R. Civ. P. 56 (e). "'If the movant presents credible evidence that would entitle him to a directed verdict if not controverted at trial, this evidence must be accepted as true when the opposing party does not offer evidence supporting his contention that an issue of fact remains.'" Framingham Clinic, Inc. v.Zoning Bd. of Appeals of Framingham, 382 Mass. 283, 298-299 (1980) (quoting 10 C.A. Wright A.R. Miller, Federal Practice and Procedure § 2727, at 532-534 (1973 Supp. 1980)).
B. Joint Venture
"'[G]enerally a joint venture is a partnership of a sort or, at least, it has many of its characteristics.'" Shain Investment Co., Inc. v.Cohen, 15 Mass. App. Ct. 4, 7 (1982) (quoting Cardullo v.Landau, 329 Mass. 5, 8 (1952)). A joint venture differs "'from a partnership in that it is ordinarily, although not necessarily, limited to a single enterprise, whereas a partnership is usually formed for the transaction of a general business.'" Id. (quoting Cardullo, 329 Mass. at 8). The relationship of joint venturers "depends upon their intent to associate as such." Id. (citing Cardullo 329 Mass. at 8).
In Shain, the Supreme Judicial Court stated that a joint venture is "a form of business relationship which has not been comprehensively defined by our courts." Id.
The Supreme Judicial Court explained that while it "may not be possible to identify criteria for the existence of a joint venture with any definiteness" there is a "pragmatic check list" which "may bear upon the recognition of" a joint venture:
"(1) an agreement by the parties manifesting their intention to associate for joint profit not amounting to a partnership or a corporation; (2) a contribution of money, property, effort, knowledge, skill, or other assets to a common undertaking; (3) a joint property interest in all or parts of the subject matter of the venture; (4) a right to participate in the control or management of the enterprise; (5) an expectation of profit; (6) a right to share in profits; (7) an express or implied duty to share in losses; and (8) a limitation to a single undertaking (or possibly a small number of enterprises)."
Id. at 8-9.
C. Applying the Shain Factors
(a) Factor 1 — An agreement by the parties manifesting their intention to associate for joint profit not amounting to a partnership or a corporation.
"While there is no rigid set of rules for entering into a joint venture in Massachusetts, it is clear that there must be proof that the parties intended to create such a business relationship." B R Realty v. Springfield Redevelopment, 708 F. Supp. 450, 456 (D. Mass. 1989). The intention of the parties to associate is a key requirement.Gurry v. Cumberland Farms, Inc., 406 Mass. 615, 623 (1990).
The testimony of the Bells and Bonarrigos indicates an intention to associate for profit. The Bells, Bonarrigos, and Madore looked at the Moseley property and determined that the group would make an offer on it. James Bell testified that he, Francis and Scott Bonarrigo, Madore, and Carolyn Bell agreed to acquire and renovate the Moseley property, and that the expenses and profits were to be divided between the Bonarrigos and Bells. James Bell testified that he and Scott Bonarrigo had talked about acquiring some investment properties, and that Francis Bonarrigo was involved in the discussion that led to the project.
Before buying the property Scott Bonarrigo and Carolyn Bell spoke about the scope of the renovation and the budget. Scott Bonarrigo and Carolyn Bell put the agreement of the Bells and Bonarrigos into writing several weeks after they purchased the property. Francis Bonarrigo testified that he probably reviewed the agreement before Scott Bonarrigo signed it, and that he did not suggest any changes.
There is no requirement that an agreement be in writing or that any specific word be used. The Bonarrigos argue that the absence of the words "joint venture" in the writing makes the agreement something other than a joint venture. This argument is without merit. Also, the court does not accord any weight to the characterization of the written agreement by Carolyn Bell as "the joint venture agreement."
Francis Bonarrigo testified that he and Scott Bonarrigo agreed that they were "fifty-fifty" on the Bonarrigo side. Carolyn Bell testified that Scott and Frank Bonarrigo were partners, and that she and James Bell were partners. Carolyn Bell testified that Madore was the Bells' partner.
The Bonarrigos make two claims in the opposition, first, that James Bell was not a party to the written agreement, but rather an independent contractor providing renovation services, and second, that James Bell was to profit on his contractor work regardless of whether the property realized a profit on sale. The Bonarrigos do not direct the court's attention to any matters that the court may consider under Mass. R. Civ. P. 56, and the court is unable to locate any support for this claim in the summary judgment record. The testimony of the parties indicates that both James Bell and Francis Bonarrigo were parties to the venture though neither was named in the writing.
The parties' testimony indicates that there was an agreement between the Bells and Bonarrigos, manifesting an intention that the two groups associate for profit, which does not amount to a partnership or a corporation.
(b) Factor 2 — A contribution of money, property, effort, knowledge, skill, or other assets to a common undertaking.
There were at least three different loans taken on the property. Scott Bonarrigo took out the first loan to purchase the property. Francis Bonarrigo testified that he, Carolyn Bell, and Scott Bonarrigo decided to refinance the first loan.
The third loan was in addition to the refinance loan, and was in Francis Bonarrigo and Carolyn Bell's names. Francis Bonarrigo testified that the third loan was for renovation work, and to enable the Bells and Bonarrigos to take money out of the project. Francis Bonarrigo testified that $50,000 went to the Bells and $50,000 to him, and that the balance was held in reserve to pay expenses to complete the project.
Francis Bonarrigo and Scott Bonarrigo testified that they invested money for the renovation. Scott Bonarrigo testified that the Bonarrigos paid half of the renovation costs. James Bell testified that the expenses incurred in the purchase of the property were paid one-half by the Bells and one half by the Bonarrigos. Carolyn Bell testified that the Bells put $201,000 into the project.
The Bells and Bonarrigos contributed money to a common undertaking.
(c) Factor 3 — A joint property interest in all or parts of the subject matter of the venture.
The deed to the Moseley property was to Scott Bonarrigo and Carolyn Bell. Cf. Petricca Dev. Ltd. Part. v. Pioneer Dev., 214 F.3d 216 (1st Cir. 2000) (finding no joint property interest where neither party had acquired a joint property interest in the subject land of a proposed venture, when the land remained solely in an original party's name.) The Bells and Bonarrigos held a joint interest in the subject matter of the venture.
(d) Factor 4 — A right to participate in the control or management of the enterprise.
"'[A] right of mutual control or management of the enterprise' is an essential element of a joint venture." Collette v. Unique Vacations, Inc., 2004 Mass. App. Div. 59, 61 (2004) (quoting Shain, 15 Mass. App. Ct. at 9). This factor requires some degree of mutual participation in the control or management amounting to more than being a mere spectator.Shain, 15 Mass. App. Ct. at 10.
Francis Bonarrigo testified that he would express his disapproval of and offer his opinion on decisions concerning details of the renovation. Along with the Bells, Francis Bonarrigo participated in the replacement of the original real estate broker and in reductions in the selling price. While Francis Bonarrigo did not have a deeded property interest his involvement in price reductions indicates that he had a degree of management control.
Scott Bonarrigo testified that in setting the asking price and price reductions that "we all agreed." Near the end of the project, when the parties were no longer on speaking terms, the broker acted as an intermediary between the participants. Scott Bonarrigo testified that he understood that his approval was necessary in order to lower the price.
James Bell managed daily operations and testified that Madore would submit time sheets to him. Carolyn Bell acted as bookkeeper and testified that she was in charge of maintaining and paying invoices.
(e) Factor 5 — An expectation of profit; Factor 6 — A right to share in profits; and Factor 7 — An express or implied duty to share in losses.
James Bell testified that the two groups expected to equally share the expenses and the losses or profits.
Scott Bonarrigo testified that the group met to discuss the lack of funding, and that they decided to refinance the first loan. The Bells and Bonarrigos were aware that losses were possible if they could not get funding to complete the project.
The Bells and Bonarrigos expected to make a joint profit when they acquired the property. By the time the project was complete and the property was sold they were trying to minimize their losses.
(f) Factor 8 — A limitation to a single undertaking, or possibly a small number of enterprises.
There were two other renovation projects involving Francis Bonarrigo and James Bell, one in South Boston during the time period of the Moseley project, and one known as Kendricks' Court. The Moseley property was the only enterprise that included both Bells and both Bonarrigos as a group. This was an undertaking limited to a single project or a very small number of projects.
Considering all of the Shain factors, with attention to the essential requirements of an intention to associate and shared control or management, there is no material issue of fact as to whether the business relationship of the Bells and Bonarrigos was a joint venture.
Gurry, 406 Mass. at 623 (finding the intention of the parties to associate is a key requirement).
Shain, 15 Mass. App. Ct. at 10-11 (even if the arrangements fell short of a textbook joint venture they were sufficiently similar to such an endeavor where the defendant was more than a spectator and not merely a passive investor as with a stock or bond investment).
D. Application of G.L. c. 93A to a Joint Venture
Chapter 93A does not apply to internal disputes between parties who associate "in the interests of forming a business venture together."Szalla v. Locke, 421 Mass. 448, 451-453 (1995) (parties who serve different roles in the formation of a business are involved in the same venture so long as the parties contributed to the project). "'As broadly and expansively as the statute [G.L. c. 93A] applies to the regulation of business practices, see Slaney v. Westwood Auto, Inc., 366 Mass. 688, 693 (1975), G.L. c. 93A is not available where the transaction is strictly private in nature, and is [in] no way undertaken in the ordinary course of a trade or business.'" Newton v. Moffie, 13 Mass. App. Ct. 462, 468 (1982) (quoting Lanter v. Carson, 374 Mass. 606, 607-608 (1978)). A transaction among parties involved in the same venture is private and outside the scope of G.L. c. 93A, which is meant to protect trade or commerce between separate entities in which the public or other business persons may be affected. Id. at 469.
The Bells and Bonarrigos formed a joint venture with the intention of renovating the house for profit. See Shain Investment Co., Inc. v.Cohen, 15 Mass. App. Ct. 4 (1982). All of the parties made various contributions toward that goal. The Bells and Bonarrigos were not dealing with each other as independent businesses or in a consumer and business context. Their joint venture relationship was outside the scope of G.L. c. 93A. See Slaney v. Westwood Auto, Inc., 366 Mass. 688 (1975);Newton v. Moffie, 13 Mass. App. Ct. 462 (1982).
ORDER
The cross-claim defendants James Bell and Carolyn Bell's motion for partial summary judgment is ALLOWED as to Count I, the G.L. c. 93A cross-claim by Scott Bonarrigo and Francis Bonarrigo.