Opinion
14-P-1912
01-27-2016
TRUSTEES OF THE WASHINGTON WEST CONDOMINIUM TRUST v. HISHAM ASHKOURI & others; FRANK BARMAKIAN, trustee, & another, third-party defendants.
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 defendants appeal from a judgment entered after a three-day bench trial in the Superior Court. The judge concluded that the record owners of four separate condominium units, i.e., Hisham Ashkouri and trustees of various realty trusts, failed to pay condominium fees in the amount of $62,071. The judge awarded the plaintiffs, the trustees of the Washington West Condominium Trust (condominium association), the total sum owed plus the costs of collection, including attorney's fees. The judge further concluded that Ashkouri breached his fiduciary duties as trustee and as manager of the condominium association, but that those damages were offset by payments made directly by Ashkouri on behalf of the condominium association. On appeal, the defendants contend that (1) the condominium association lost standing to maintain the suit after a majority of the trustees voted to dismiss the suit with prejudice; (2) the judge improperly tried the case without a jury; and (3) the judge erred in assessing damages. We affirm.
The appellants include several of the defendants in the main action and several who appeared only as third-party plaintiffs. For ease of reference, we refer to the appellants as the defendants.
1. Standing. Standing is an issue of subject matter jurisdiction, and "[w]e must take note of the absence of standing, whenever it appears." Statewide Towing Assn. v. Lowell, 68 Mass. App. Ct. 791, 794 (2007). See Mass.R.Civ.P. 12(h)(3), 365 Mass. 754 (1974). "[F]or [a] plaintiff to have standing, the injury alleged must fall within the area of concern of the statute or regulatory scheme under which the injurious action has occurred." Sullivan v. Chief Justice for Admin. & Mgmt. of the Trial Ct., 448 Mass. 15, 21-22 (2006) (quotation and citation omitted).
a. Pretrial proceedings. It is uncontested that the condominium association had standing to bring the lawsuit underlying this appeal. See Berish v. Bornstein, 437 Mass. 252, 265 (2002). The "recovery of funds properly owing to the [condominium] association" is a claim that belongs to the condominium association, and clearly falls within the area of statutory and regulatory concern. Cigal v. Leader Dev. Corp., 408 Mass. 212, 219 (1990). See G. L. c. 183A, § 10(b)(4). The defendants argue (without citation to authority) that the condominium association lost standing to maintain the suit after a majority of the condominium association's trustees voted to dismiss the suit with prejudice. After the condominium association filed its lawsuit, two additional trustees were appointed to the board of the condominium association. Ashkouri, who had been trustee for four separate units, was replaced as trustee by Wasmaa Al Chorbachi as to one unit and Walaa Al Chorbachi as to another. The condominium association alleged that the units represented by Ashkouri, Wasmaa, and Walaa owed fees to the association.
The condominium association was organized as a trust, with a board that consisted of three trustees at the time the suit was filed: Ashkouri, Frank Barmakian, and Donald J. Stanton. Pursuant to the declaration of trust, the trustees could take action on behalf of the condominium association by unanimous consent or a majority vote at a board meeting attended by a quorum. Under the terms of the declaration of trust, a majority vote at a meeting attended by a quorum is determined by the number of trustees on the board and at the board meeting, not by the percentage interest in the condominium's common areas or the number of units that each trustee represents. In an earlier ruling, a motion judge ruled, based on the provisions of the declaration of trust, that each trustee's vote carried equal weight regardless of the number of units an individual trustee represented, and that at a special meeting on April 22, 2010, a majority of the trustees, i.e., Barmakian and Stanton, authorized this litigation. This ruling is not challenged on appeal.
The validity of the appointments is uncontested on appeal.
We refer to the Al Chorbachis by their first names.
At a special meeting in December of 2010, Ashkouri, Wasmaa, and Walaa purported to vote as a majority of the five trustees to dismiss the complaint with prejudice. Ashkouri, Wasmaa, and Walaa then filed a stipulation of dismissal with prejudice on behalf of the condominium association, which was opposed. Thereafter, the defendants filed a motion to dismiss styled as a "motion in limine to dismiss plaintiff's claims for lack of standing" and an "emergency motion for declaratory judgment." Although a hearing was held on the motion to dismiss, no decision on these motions was issued until trial. In these motions, and now on appeal, the defendants argue that because G. L. c. 183A, § 10(b)(4), confers standing on the condominium association to conduct litigation, the condominium association lost standing pursuant to G. L. c. 183A, § 10(b)(4), once a majority of the condominium association's trustees voted to dismiss the suit with prejudice.
Whether treated as a question of standing, or simply the authority of the trustees to maintain the suit, the judge was permitted, and indeed obligated, to determine whether the vote to dismiss the litigation was valid. "Trustees may not put themselves in a position where their interests are in conflict with the interests of the trust." Johnson v. Witkowski, 30 Mass. App. Ct. 697, 705 (1991). "Where [a trustee's] duty of loyalty to the [trust] is in conflict with his self-interest the court will vigorously scrutinize the situation." Id. at 709-710 (citation omitted). Each of the trustees who voted to dismiss the suit had a conflict of interest, as the condominium association had claimed that the units they represented were in arrears on their condominium fees. If the trustees did, in fact, represent units that were in arrears, the trustees then were interested parties, see Cote v. Levine, 52 Mass. App. Ct. 435, 442 (2001), and the court was permitted to "strictly enforce[]" the fiduciary rule against self-dealing and hold invalid the vote of the interested trustees, Johnson, supra at 706. See Restatement (Third) of Trusts § 78(2) (2007) ("[T]he trustee is strictly prohibited from engaging in transactions that involve self-dealing or that otherwise involve or create a conflict between the trustee's fiduciary duties and personal interests").
b. Consolidation of motion and trial. The judge properly treated the issue of the propriety of the vote as requiring consideration of the evidence. See Abate v. Fremont Inv. & Loan, 470 Mass. 821, 831 (2015). "[T]here is no impediment to a judge holding a hearing to determine the accuracy of alleged jurisdictional facts." Ibid. Furthermore, in this case, the judge did not abuse her discretion in resolving the issue of standing or authority, which was tied to the merits of the underlying action, at trial. See Johnson, supra ("The burden of proving good faith and fairness is on the trustee, as is the burden to show that any questioned transaction was advantageous to the beneficiaries"). Under Mass.R.Civ.P. 12(d), as amended, 451 Mass. 1401 (2008), the judge had the discretion to "order[] that the hearing and determination [on a rule 12(b) defense] be deferred until the trial." By holding a hearing and reserving judgment, the judge effectively ordered that the issue be deferred until trial. Cf. Cepeda v. Kass, 62 Mass. App. Ct. 732, 739 n.8 (2004) ("If a court applies the prima facie standard and denies the motion to dismiss, the court is effectively ordering that the hearing and determination of the issue of [personal] jurisdiction be deferred until the trial").
If the judge had found the vote valid, the plaintiffs may have sought leave to amend to file a derivative action. Neither party suggests that the result in a derivative action would have been any different.
c. Trial. The defendants claim that they were denied the opportunity to litigate standing (or authority) at trial. The record belies this contention. At the outset of the trial, the judge told the parties that if they were "prepared to provide evidence on [the issue of condominium fees, then she would] address the motion to dismiss also." At the beginning of the second day of trial, the judge told the parties that she would hear evidence and argument on the motion for declaratory judgment "separately" and that it would be "part two" of the trial. At the end of the third day of trial, the judge heard arguments by the parties on the defendants' motions to dismiss and for declaratory judgment. The defendants sought admission of several exhibits in evidence.
The judge and the attorney for the defendants agreed that the motion to dismiss "raise[d] the same issues as the [motion for] declaratory judgment."
In her findings of fact and conclusions of law, the judge specifically found that Ashkouri, Walaa, and Wasmaa were each "trustee[s] of a trust that owned a unit that owed condominium fees that are the subject of this suit" and that the units for which Ashkouri, Walaa, and Wasmaa were trustees were in arrears. The judge concluded that "[g]iven their obvious conflict of interest, it is evident that the three trustees cannot satisfy their burden of proving the 'intrinsic fairness' of the vote and that the vote did not harm the Trust." It is well settled that "a fiduciary may not . . . put himself in a position antagonistic to the beneficiaries of the trust," and that such a rule "will be strictly enforced." Johnson, 30 Mass. App. Ct. at 706. The judge properly dealt with the motions to dismiss and for declaratory judgment, and we find no error in her ruling, whether treated as a decision regarding standing or authority to maintain the suit.
For these reasons, the defendants' argument that the judge failed to take evidence and make factual findings on the motions to dismiss for lack of standing and for declaratory judgement has no merit.
2. Jury waiver. Citing to Stockbridge v. Mixer, 215 Mass. 415, 418 (1913), the defendants claim they were entitled to a jury trial on the plaintiffs' claims for unjust enrichment and breach of the implied covenant of good faith and fair dealing. See part 1, art. 15, of the Constitution of the Commonwealth of Massachusetts; Mass.R.Civ.P. 38(a), 365 Mass. 800 (1974). In her final disposition, the judge treated the damages for these causes of action as duplicative of relief already given on the other, equitable, causes of action.
Where there is a right to, and a demand for, a jury trial, the trial must be by jury unless (1) a waiver of that right is made "by written stipulation filed with the court or by an oral stipulation made in open court and entered in the record . . . or (2) the court upon motion or of its own initiative finds that a right of trial by jury of some or all of those issues does not exist under the constitution or statutes of this commonwealth." Mass.R.Civ.P. 39(a), as amended, 450 Mass. 1403 (2008). See Northeast Line Constr. Corp. v. J.E. Guertin Co., 80 Mass. App. Ct. 646, 649-650 (2011). We need not reach the correctness of the judge's ruling with respect to the right to jury trial because the issue has not been preserved for appellate review.
Before proceeding with the trial, the judge told the parties that she had reviewed the claims and did not see a cause of action that would entitle the parties to a jury trial. She asked if the parties wanted to be heard on the issue, and the defendants' attorney asked if the judge would first address the motion for declaratory judgment. The judge responded that she did not think that issues presented in that motion entitled the parties to trial by jury, but that she would hear from the parties if they thought she was incorrect.
The defendants registered no objection to proceeding without a jury then or at any point during the three-day trial. Several weeks after trial they submitted proposed findings and rulings. They raise the issue for the first time on appeal. "If the [defendants] wished to preserve [their] jury claim, [they] should have registered an objection . . . at the time." M. J. Pirolli & Sons v. Massachusetts Equip. & Supply Corp., 9 Mass. App. Ct. 863, 864 (1980). This is not a case where an objection was made, see Johnson v. Post Motors, Inc., 7 Mass. App. Ct. 857, 857 (1979); Hutchins v. Maloomian, 32 Mass. App. Ct. 950, 951 (1992), and "[w]e do not consider the question now," M. J. Pirolli & Sons, supra. Contrast Northeast Line Constr. Corp., supra at 653 (belated objection to master's report; judge's finding of waiver upheld where docket entries coupled with pattern of acquiescence in proceeding before master demonstrated waiver).
3. Damages. The defendants argue that they are entitled to a setoff in the amount of $23,882.44 for expenses of the condominium association for which Ashkouri paid personally and was not reimbursed. The judge found, and the parties do not dispute, that the defendants failed to pay a total of $62,071 in condominium fees, and that the condominium association was entitled to recover the costs of collecting unpaid condominium fees, including attorney's fees and expenses totaling $79,157.31.
Pursuant to G. L. c. 183A, § 6(b), a condominium unit owner shall be personally liable for all sums assessed for his share of the common expenses including late charges, fines, penalties, and interest assessed by the organization of unit owners and all costs of collection including attorney's fees, costs, and charges. Furthermore, it is well settled that "there is no right to a set-off against a lawfully imposed condominium charge." Trustees of the Prince Condominium Trust v. Prosser, 412 Mass. 723, 725 (1992). See Baker v. Monga, 32 Mass. App. Ct. 450, 453-454 (1992). Absent "extraordinary circumstances" no setoffs will be allowed against the collection of lawfully assessed condominium fees. Prosser, supra at 726. No extraordinary circumstances are on the record before us. Therefore, the defendants were not entitled to a setoff against the condominium fees or the costs of collecting those fees, including attorney's fees, costs, and charges. Ibid. See G. L. c. 183A, § 6(b).
The judge found other damages totaling $15,872.39. However, the judge determined that the amount did "not exceed the expenses [Ashkouri] paid [i.e., $23,882.44,]" and did not require that any of those damages be paid to the plaintiffs. Neither in their answer nor in their third-party complaint did the defendants make a claim for the $23,882.44. No other relief was warranted. The judge made no error.
Next, the defendants argue that as part of the $15,872.39 in other damages found, the judge improperly ordered disgorgement of the $6,150 in management fees paid to Ashkouri as a result of his breaches of fiduciary duty where the harm caused by his breaches totaled $525.23. On the record before us it is abundantly clear that the judge did not err in ordering disgorgement of Ashkouri's management fees where he failed to maintain records, failed to provide access to the books and records and any accounting, destroyed records, and neglected to pay and to collect condominium fees. Cf. Rugo v. Rugo, 325 Mass. 612, 620 (1950). "The conduct of [Ashkouri] is thus shown to have been not only worthless to the beneficiaries but also detrimental to them. A denial of compensation to [Ashkouri] for services was warranted." Milbank v. J. C. Littlefield, Inc., 310 Mass. 55, 63 (1941). See Rugo v. Rugo, supra. See generally Restatement (Third) of Trusts § 83 comment a(1) (2007) ("[Failures to keep proper records] by trustees may furnish grounds for reducing or denying compensation"); Dunphy, Probate Law and Practice § 39.10 (1997) (It is "within the discretion of the court to allow, deny or reduce [a] trustee's compensation," depending upon nature of breach of trust and prejudice to beneficiary). Cf. Restatement (Third) of Trusts § 100(b) & comment c (2012).
4. Appellate attorney's fees and costs. The condominium association, having prevailed on appeal, is entitled to reasonable attorney's fees and costs for this appeal under the condominium statute. See G. L. c. 183A, § 6(c). See also Yorke Mgmt. v. Castro, 406 Mass. 17, 19 (1989) ("The statutory provisions for a 'reasonable attorney's fee' would ring hollow if it did not necessarily include a fee for the appeal"). The condominium association's verified and itemized application for fees and costs may be filed within fourteen days of the rescript. See Fabre v. Walton, 441 Mass. 9, 10-11 (2004). The defendants will have fourteen days thereafter to file any opposition to the amounts requested. Ibid.
Judgment affirmed.
By the Court (Kafker, C.J., Milkey & Sullivan, JJ.),
The panelists are listed in order of seniority. --------
/s/
Clerk Entered: January 27, 2016.