Opinion
No. 15–P–1006.
12-05-2016
NATIONAL LUMBER COMPANY v. ROSEWOOD MANAGEMENT ASSOCIATES, INC. & others.
MEMORANDUM AND ORDER PURSUANT TO RULE 1:28
The defendants were found liable to the plaintiff, National Lumber Company, for contract and fraudulent transfer claims. Those claims were tried separately in Superior Court before two different judges, each of whom found in favor of the plaintiff. The defendants now appeal both judgments, arguing that each judge made erroneous findings of fact and rulings. We affirm.
1. Background. The plaintiff contracted with the defendants in varying capacities to supply lumber for construction projects performed by Triton Construction Corporation (Triton) and Rosewood Management Associates, Inc. (Rosewood). The three complaints brought by the plaintiff in Superior Court, which were eventually consolidated, alleged outstanding debt for lumber supplied to Triton and Rosewood pursuant to various contracts. Guaranties were executed for the various debts by both Robert J. Depietri (Robert) and David P. Depietri (David) personally and by Rosewood for the debt owed by Triton. The plaintiff alleged that the parties entered into a settlement agreement to rectify the numerous delinquencies, and that the defendants eventually breached the settlement agreement. That breach was the subject of the first trial, after which a judge ultimately found that the defendants were indeed liable for breach of contract and that David and Robert were liable under their guaranties in a total amount of $624,769.17.
Interest and costs were also included in that judgment.
After a separate trial, judgment entered in favor of the plaintiff against David for fraudulent conveyance. A second judge found that David conveyed his most valuable personal asset, his home, to a limited liability company whose sole member and manager is David's mother. The conveyance was for nominal value. David remained in the property, made the mortgage payments, paid the real estate taxes, and claimed home mortgage interest deductions on his taxes. The judge found that David had substantial financial liabilities when the transfer was made and that he was anticipating impending legal action. Considering those and other factors, the judge found that there were sufficient "badges of fraud" to support a finding of fraudulent transfer under the Uniform Fraudulent Transfer Act (UFTA), G.L. c. 109A.
2. Contract claims. The defendants argue that the basis of the contract claims—missed payments for lumber and materials between 2004 and 2007—was the result of inaccurate billing and overreached the scope of the guaranties. The defendants argue that there was no evidence to suggest that they were aware that the plaintiff was billing them for the lumber for the construction project at issue. Instead, they assert that any agreements and guaranties are discrete and apply only to particular projects, and thus the judge's findings were clearly erroneous. We disagree.
Great deference is offered to the factual findings of a trial judge. See Mass.R.Civ.P. 52(a), as amended, 423 Mass. 1402 (1996). "Findings 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." Ibid. White v. Hartigan, 464 Mass. 400, 414 (2013).
We conclude that there was ample evidence to support the judge's findings and rulings. Documentary evidence outlined the agreements and the guaranties in place between the parties. Robert and David, through admissions and testimony, admitted to having signed the guaranties and the settlement agreement. It was clear in the judge's thoughtful and comprehensive findings that he considered the conflicting evidence and found the defendants' argument to lack credibility. There was no error.
3. Fraudulent transfer. David claims on appeal that the judge erroneously determined that he fraudulently transferred his residence. David argues that the evidence revealed that he owed his mother more money than he had in equity in the home, that he was financially solvent, and that he did not believe he could be held responsible for the outstanding debts to National. As a result, he argues, his transfer could not have been deemed fraudulent, and the judge's findings of sufficient "badges of fraud" was clearly erroneous. We disagree.
A transfer is deemed fraudulent under the UFTA if a debtor makes a transfer with the "actual intent" of defrauding or otherwise hindering a creditor. G.L. c. 109A, § 5(a)(1), inserted by St.1996, c. 157. See Palmer v. Murphy, 42 Mass.App.Ct. 334, 345 (1997). Several factors, commonly referred to as "badges of fraud," are enumerated in the UFTA for consideration in determining the presence of actual intent. See G.L. c. 109A, § 5(b) ; Palmer, supra. "[T]he confluence of several [badges of fraud] can constitute conclusive evidence of an actual intent to defraud, absent ‘significantly clear’ evidence of a legitimate supervening purpose." Max Sugarman Funeral Home, Inc. v. A.D.B. Investors, 926 F.2d 1248, 1254–1255 (1st Cir.1991).
The judge noted the presence of several of those badges of fraud in his decision: David's mother, the transferee, was an insider; David maintained control over the property, as he continued to live there, paid the mortgage and property taxes, and took Federal income tax deductions based on those payments; law suits against David were anticipated at the time of the transfer; the transferred property was David's most significant asset; there was insufficient evidence that David received "reasonably equivalent value" for the transfer; and the transfer included a provision that would return the property to David upon payment of "approximately" $1 million to his mother. The judge further found, pursuant to G.L. c. 109A, § 6(a ), that since David was insolvent at the time of the transfer and did not receive reasonably equivalent value for the property, the transfer was constructively fraudulent.
Considering the ample evidence cited by the judge and his clear concerns regarding David's credibility, we defer to the judge's factual findings. There was no error. See White, supra.
Judgments affirmed.