Opinion
13-P-1500
10-15-2014
BARBARA A. FINI, trustee v. J.W. BOUDREAU CORPORATION & others.
NOTICE: Decisions issued by the Appeals Court pursuant to its rule 1:28 are primarily addressed to the parties and, therefore, may not fully address the facts of the case or the panel's decisional rationale. Moreover, rule 1:28 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.
MEMORANDUM AND ORDER PURSUANT TO RULE 1:28
The parties cross-appeal from a judgment entered for the plaintiff in the amount of $5,750 in her claim pursuant to G. L. c. 109A (Uniform Fraudulent Transfer Act or UFTA). The plaintiff claims that the judge erred in limiting her recovery under the doctrine of issue preclusion to the amount contained in a prior c. 109A action against different assets of defendant J.W. Boudreau Corporation (debtor corporation). In their cross appeal, James Boudreau (James) and the debtor corporation (collectively, Boudreau) argue that the trial judge erred in determining that the asset, the property at lot 2 Rear Aaron Street in Framingham, was fraudulently transferred.
In 1996, Benito E. Fini and Morris A. Schwartz, trustees of Moben Realty Trust (trust), obtained a judgment against the debtor corporation, in an action originally commenced in 1990, in the amount of $106,069 plus interest. The trustees obtained an execution in that amount on May 26, 1996. Meanwhile, while the trust's action against the debtor corporation was pending, the corporation voluntarily dissolved in May, 1994, transferring most of its assets to a new corporation, Boudreau & Associates, Inc. (successor corporation). In 1999, Benito E. Fini, as trustee of the trust, commenced an action pursuant to the UFTA, against the debtor corporation, the successor corporation, James Boudreau, and his son. That action was resolved by an agreement for judgment which requested that the court enter final judgment against the defendants in the amount of $7,500, and indicated that the judgment should be entered with prejudice, with the parties waiving their right to appeal. A judgment in accordance with the parties' agreement entered in the UFTA action; the defendants only satisfied a small portion of that reduced judgment. There was no general release entered into as part of this judgment.
Meanwhile, the title to the property owned by the debtor corporation was not transferred to the successor corporation at the time the other assets of the corporation were transferred, and the title remained in the name of the debtor corporation even after it was dissolved. The debtor corporation originally bought the property in 1989, and conveyed a $100,000 mortgage to Beverly Boudreau, James's wife. The mortgage was recorded in the registry of deeds in 1990. However, on disputed evidence, the judge found that there was no competent evidence that Beverly actually loaned the debtor corporation $100,000, and concluded that no monetary consideration was ever given by Beverly in exchange for the mortgage she received. In 2004, during the pendency of a divorce proceeding, Beverly and James filed an application to revive the debtor corporation for the purpose of conveying the property. The application was allowed, and the property was conveyed by the corporation to James and Beverly as tenants in common for consideration of less than one hundred dollars. At that point the debtor corporation listed the property as its only asset, valued at $175,000.
In 2007, Barbara A. Fini, as trustee of the trust, commenced this action against the debtor corporation and James and Beverly Boudreau, alleging the 2004 conveyance of the corporation's sole asset, the property, for nominal consideration, was a fraudulent conveyance, and seeking to reach and apply that asset to satisfy the debt owed by the corporation. On the defendants' motion for summary judgment, the judge, applying the doctrine of issue preclusion, determined that the 2004 agreement for judgment in the 1999 UFTA action, had the effect of reducing the trust's 1996 judgment for $106,069 to $7,500. Accordingly, the trust's maximum recovery in this action would be $7,500 minus the small portion previously paid pursuant to the agreement for judgment in the 1999 action.
We determine that while the judge here faithfully applied all the elements of issue preclusion, her analysis misses a fundamental point: the judgment in the 1999 action concerned only the assets of the debtor corporation transferred to the successor corporation. Accordingly, any recovery would be limited only to the assets fraudulently transferred to the successor corporation as of that time. See G. L. c. 109A, § 9(b). At the time the 2004 judgment in the 1999 UFTA action entered, the asset of the corporation at issue here, the property, had not been transferred to the successor corporation and could not be the subject of the settlement. As noted by the plaintiff, an action under UFTA is an ancillary claim to the original action.
"As the language of the UFTA makes clear, an action for relief under G. L. c. 109A, § 8, depends upon the existence of an independently valid claim. In other words, the remedies available under the UFTA 'furnish a convenient and expeditious method by which creditors may satisfy their claims but they do not create claims.'" Kraft Power Corp. v. Merrill, 464 Mass. 145, 153-154 (2013) (Kraft), quoting from Blumenthal v. Blumenthal, 303 Mass. 275, 279 (1939). Accordingly, "UFTA provides only a remedy for an independently valid claim." Kraft, supra at 154. This is consonant with the provisions of G. L. c. 109A, § 9(b), which permits recovery under the act for either "the value of the asset transferred . . . or the amount necessary to satisfy the creditor's claim, whichever is less." We also consider it significant that the judgment in the 1999 action did not contain a general release. See, e.g., Radovsky v. Wexler, 273 Mass. 254, 258-259 (1930) (noting that general release "discharge[s]" all notes and contracts related to debt). For this reason, we determine that "the issue in the prior [1999] adjudication" is not "identical to the issue in the current adjudication." Green v. Brookline, 53 Mass. App. Ct. 120, 123 (2001). That part of the judgment that limits the plaintiff's recovery must be reversed. After entry of the summary judgment order, the matter proceeded to a brief jury-waived trial, after which the judge found that the conveyance of the property by the debtor corporation was a fraudulent conveyance within the meaning of G. L. c. 109A, § 6(a), because at the time of the 2004 transfer the trust held an uncollected judgment and execution from the original action against the debtor corporation; the 2004 property transfer was made without receiving reasonably equivalent value in exchange; and, as the property was the only asset of the debtor corporation, the transfer rendered the debtor corporation insolvent. We agree with the judge's analysis of the fraudulent transfer.
General Laws c. 109A, § 6(a), provides as follows: "A transfer made or obligation incurred by a debtor is fraudulent as to a creditor whose claim arose before the transfer was made or the obligation was incurred if the debtor made the transfer or incurred the obligation without receiving a reasonably equivalent value in exchange for the transfer or obligation and the debtor was insolvent at that time or the debtor became insolvent as a result of the transfer or obligation."
As to Boudreau's cross appeal, we reject any argument premised on the reduced value of the judgment for the reasons discussed above. We also reject the argument that the transfer was not fraudulent because reasonably adequate consideration was given by James to the debtor corporation for the property. This argument is contradicted by the judge's finding that there was no evidence to support Boudreau's assertion that the corporation gave a mortgage to Beverly Boudreau. See Rood v. Newberg, 48 Mass. App. Ct. 185, 190 (1999) (noting that judge's findings of fact are "not set aside . . . unless they are 'plainly wrong' . . . or 'clearly erroneous'").
Boudreau's contention on appeal that the validity of the mortgage cannot be challenged because it was executed under seal is waived as it was raised for the first time in the motions for postjudgment relief. See, e.g., Spence v. O'Brien, 15 Mass. App. Ct. 489, 499 (1983), quoting from M.H. Gordon & Son, Inc. v. Alcoholic Bevs. Control Commn., 386 Mass. 64, 67 (1982)) ("an issue not raised in the trial court cannot be argued for the first time on appeal"). See also Knott v. Racicot, 442 Mass. 314, 319-323 (2004), which abolished the distinction between sealed and unsealed contracts for purposes of consideration in option contracts, and questioned the continuing viability of the effect of sealed instruments.
So much of the judgment as voids the property transfer and makes the property available to satisfy the judgment is affirmed. In all other respects, the judgment is vacated and the matter is remanded to the Superior Court for further proceedings consistent with this decision.
So ordered.
By the Court (Berry, Kafker & Hanlon, JJ.),
Clerk Entered: October 15, 2014.