Opinion
14-P-521
02-11-2015
RBOC, INC., assignee, v. OUTDOOR ENDEAVORS, 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
The plaintiff, RBOC, Inc. (RBOC), as assignee of the rights of Roy Brothers Oil Company, Inc., seeks to collect payment for fuel it delivered to a gas station and convenience store in Winchendon. The gas station and convenience store were owned and operated by Outdoor Endeavors, Inc. (OEI), which in turn was owned and operated by Mark and Lynette Shields.
RBOC initially commenced suit against OEI in November, 2009, and obtained a default judgment against OEI in the amount of $161,997.08 in May, 2010. After discovering that OEI's assets had been transferred to entities owned by the Shieldses' in-laws, John and Beverly Rowe (the Rowes), RBOC was granted leave to amend its complaint to add Gardner Road, LLC (Gardner Road), J & B Holding, LLC (J & B), and the Rowes as defendants. RBOC alleged, and a jury ultimately found, that OEI had engaged in a series of actions resulting in the constructive or intentional transfer of its assets to J & B in violation of G. L. c. 109A, § 5, of the Uniform Fraudulent Transfer Act (UFTA). The defendants responded to the jury verdict by filing a motion for judgment notwithstanding the verdict (or, in the alternative, a new trial) which was allowed. RBOC now appeals. We affirm the judgment notwithstanding the verdict.
The jury found for the defendants on other counts not relevant here.
1. Standard of review. When evaluating a motion for judgment notwithstanding the verdict, it is the judge's task to consider the facts in the record in the light most favorable to the nonmoving party, Whitehall Co. v. Barletta, 404 Mass. 497, 504 (1989), and to "determine whether, without weighing the credibility of the witnesses or otherwise considering the weight of the evidence, the jury reasonably could return a verdict" for the nonmoving party. Phelan v. May Dept. Stores Co., 443 Mass. 52, 55 (2004) (Phelan), quoting from Tosti v. Ayik, 394 Mass. 482, 494 (1985). On appeal, we review a judgment notwithstanding the verdict using the same standard as the motion judge. Phelan, supra.
2. UFTA claim. In order to prevail on its claim under the UFTA, RBOC must demonstrate that (1) it is a creditor, and (2) OEI fraudulently transferred its property. Alford v. Thibault, 83 Mass. App. Ct. 822, 827 (2013) (Alford). The parties do not dispute that RBOC is a creditor for the purposes of the UFTA. As for the second element, the relevant portion of § 5 of the UFTA establishes that a transfer is fraudulent if a debtor makes a transfer "with actual intent to hinder, delay, or defraud any creditor of the debtor." G. L. c. 109A, § 5(a)(1), as inserted by St. 1996, c. 157.
Drawing from the facts stipulated by both parties, the plaintiff paints a picture of the Rowes as "savvy business people accustomed to shrewd negotiations" who were intent on defrauding RBOC by acquiring OEI's assets "without any other liabilities." While a generous reading of the facts may support such an inference, the plaintiff's claim requires a showing of fraudulent intent not on the part of the Rowes, but of OEI. As articulated in the trial judge's memorandum and order, the facts simply do not support this element of the claim, given that the Shieldses -- as personal guarantors for OEI -- were forced into personal bankruptcy by the foreclosure proceedings initiated by the Rowes.
Moreover, if we were to entertain the idea that OEI did harbor fraudulent intent, "[a] transfer, even if made with intent to defraud, is not deemed fraudulent in fact unless there has been a resulting diminution of the assets available to the creditor." Alford, 83 Mass. App. Ct. at 828. As a result of the foreclosure proceedings, OEI's assets were auctioned off subject to outstanding real estate and municipal liens, as well as the senior mortgage debt of $552,000 to Flagship Bank & Trust Company (Flagship) via a widely advertised, regularly conducted, and noncollusive foreclosure sale. See G. L. c. 109A, § 4(b).
Even prior to the foreclosure sale, RBOC would not have been able to reach OEI's assets, as the evidence demonstrates that the sum of its secured debt far outstripped the fair market value of OEI's holdings. At the time of the foreclosure auction, OEI's debt totaled approximately $1,692,000, which stemmed primarily from its mortgages to Flagship and the Rowes. The evidence at trial shows that J&B's winning bid at auction for $950,000 in addition to the $552,000 for the senior mortgage and municipal lien creditors, reflected the property's actual market value. Compared to OEI's debt, this was a nearly $200,000 shortfall. "Where a creditor 'could not have reached the property before the conveyance, it follows that the conveyance itself could not have been fraudulent as to him,' notwithstanding the debtor's fraudulent intent." Alford, 83 Mass. App. Ct. at 828, quoting from Richman v. Leiser, 18 Mass. App. Ct. 308, 312 (1984). Thus, a fact finder could not reasonably return a verdict for RBOC.
Nor does the plaintiff pursue an argument that there was equity in the property exceeding the secured debt.
Judgment notwithstanding the verdict affirmed.
By the Court (Kafker, Grainger & Agnes, JJ.),
The panelists are listed in order of seniority.
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Clerk Entered: February 11, 2015.