Aa & D Masonry, LLC v. S. St. Bus. Park, LLC

• Decision Date: 08 August 2018
• Docket Number: No. 16-P-1752.,16-P-1752.
• Citation: 107 N.E.3d 1229,93 Mass.App.Ct. 693
• Parties: AA & D MASONRY, LLC v. SOUTH STREET BUSINESS PARK, LLC, & others.
• Court: Appeals Court of Massachusetts

93 Mass.App.Ct. 693

107 N.E.3d 1229

AA & D MASONRY, LLC

v.SOUTH STREET BUSINESS PARK, LLC, & others.¹

No. 16-P-1752.

Appeals Court of Massachusetts, Norfolk..

Argued November 13, 2017.

Decided August 8, 2018.

Mark C. O'Connor, Boston, for the plaintiff.

Samuel Perkins, Boston, for Olga L. Franchi & others.

Present: Vuono, Rubin, & Henry, JJ.

VUONO, J.

The plaintiff, AA & D Masonry, LLC (AA & D), appeals from a judgment dismissing its complaint on statute of limitations grounds. As will be discussed in more detail below, this is the latest in a series of actions brought by AA & D to obtain payment for masonry work it performed in 2009, in connection with the construction of an office park (the project) on property owned by the defendant, South Street Business Park, LLC (South Street). The first case resulted in default judgments against South Street and the project's contractor, Crowsnest Corporation (Crowsnest). The present complaint was filed on October 30, 2015, and asserts claims against South Street, its principal, David A. Franchi, and members of David's family including Olga L. Franchi (mother), Domenic Franchi (father), John S. Franchi (brother), and Lisa M. Carroll (sister).² AA & D claims that each of the individual defendants had sufficient involvement and ownership interest in South Street to be held liable for South Street's breach of contract and the default judgment under the theory of piercing the corporate veil. For the reasons that follow, we conclude that the complaint was properly dismissed.

Background. We summarize the facts alleged in AA & D's complaint and describe the history of prior related litigation in order to provide context for our discussion of the issues.³ On or about January 6, 2009, AA & D entered into a written contract with Crowsnest for the benefit of South Street to furnish masonry labor and materials to the project.⁴ The contract sum was $409,452. The complaint alleges that AA & D was induced to enter the contract by South Street and Crowsnest through representations of the project manager that AA & D would be paid in installments from the proceeds of a construction loan from Wells Fargo Bank, N.A. (Wells Fargo), which was secured by a mortgage on the property.⁵

AA & D completed its work in June of 2009, but it was not paid as promised. This led AA & D to file a mechanic's lien under G. L. c. 254, § 4. AA & D recorded a notice of the contract and a statement of account in the Middlesex South District registry of deeds on June 29, 2009, and August 26, 2009, respectively. By that time, as AA & D subsequently learned, South Street had granted a mortgage to Olga in the amount of $4,750,000.⁶ The mortgage was secured by the property and recorded at the same Registry on March 12, 2009. A discharge of that mortgage was recorded shortly thereafter, on March 25, 2009.

On August 27, 2009, AA & D commenced an action to enforce its mechanic's lien against Crowsnest, South Street, and Wells Fargo as a party in interest. Neither Crowsnest nor South Street filed a response to the complaint.⁷ On April 21, 2010, AA & D obtained separate default judgments against South Street and Crowsnest, in the amount of $409,452 plus interest (the South Street judgment).⁸ No portion of the South Street judgment has been paid to AA & D.

More than three years later, on or about January 11, 2013, AA & D filed a new lawsuit against Crowsnest, David, and Olga, alleging that David, a principal of Crowsnest, and Olga, a de facto principal, were jointly and severally liable with Crowsnest for contempt for nonpayment of the South Street judgment. The complaint further alleged claims of fraudulent misrepresentation, breach of the covenant of good faith and fair dealing, unjust enrichment, conversion, and violation of G. L. c. 93A (the 2013 case).

Olga moved to dismiss the complaint in the 2013 case under Mass.R.Civ.P. 12(b)(6), 365 Mass. 754 (1974). In its opposition to Olga's motion, filed on March 4, 2013, AA & D asserted that (1) "[t]he public records of this court and Middlesex South [r]egistry of [d]eeds indicate a pattern by David Franchi to defraud his creditors through his corporate entities. In some instances this appears to have been accomplished with the assistance of his mother, Olga Franchi"; (2) "[a] search of David Franchi's name through the Trial Court Information Center reveals dozens of suits were filed in Middlesex Superior Court by creditors and contractors against him and the corporate entities in which he was a principal"; (3) in addition to its suit, AA & D had discovered at least three other suits filed against Crowsnest and South Street by subcontractors alleging nonpayment for work on the project; and (4) AA & D had recently discovered, from records relating to an action on the mortgage filed in Superior Court by Wells Fargo against South Street and David, that David and South Street had defaulted on the construction loan in April of 2009. AA & D pointed specifically to the $4,750,000 mortgage to Olga, as recorded in the Middlesex South District registry of deeds (and a copy of which was attached to AA & D's opposition), as evidence of collusion and fraud because it showed that Olga was involved in diverting funds from the Wells Fargo loan. AA & D argued that the timing of South Street's April 1, 2009, default on the Wells Fargo loan "is curious because it comes immediately after South Street granted Olga Franchi a mortgage in the amount of $4,750,000 and discharged the same in less than thirty days."

Ultimately, Olga's motion to dismiss the complaint was allowed. AA & D appealed, and the judgment of dismissal as to Olga was affirmed in an unpublished memorandum and order issued pursuant to our rule 1:28. See AA & D Masonry, LLC v. Franchi, 87 Mass. App. Ct. 1136, 33 N.E.3d 1269 (2015). No final judgment appears to have entered with respect to David and Crowsnest.⁹

As indicated, AA & D brought this Superior Court action on October 30, 2015. The allegations in the current complaint mirror those asserted in the 2013 case (albeit with more particularity) and are primarily as follows: (1) South Street fraudulently diverted loan proceeds from Wells Fargo to other entities owned and controlled by the individual defendants; (2) the defendants confused and intermingled the assets of South Street and their other entities while failing to observe corporate formalities; (3) on February 25, 2009, South Street fraudulently granted Olga a mortgage in the amount of $4,750,000; (4) South Street defaulted multiple times on the Wells Fargo loan and concealed that fact from AA & D; (5) David and Crowsnest also concealed from AA & D that they had been sued by another contractor in connection with the project; and (6) the individual defendants are de facto principals, owners, and alter egos of South Street and, as such, they controlled and managed South Street directly or through David as their agent. AA & D's complaint seeks relief for contempt of the South Street judgment (count I), fraud in the inducement (count II), conversion (count III), unjust enrichment (count IV), and violations of G. L. c. 93A (count V). It also seeks, in count VI, to pierce the corporate veil to hold the individual defendants liable for South Street's conduct as stated in counts II through V.

The defendants filed motions to dismiss AA & D's complaint on the ground, among others, that counts II through VI are barred by the applicable statutes of limitations, the longest of which is six years. They maintained that AA & D was harmed in 2009, when it was not paid from the proceeds of the Wells Fargo loan as promised. AA & D did not dispute that the applicable statutes of limitations had expired unless tolling applied.¹⁰ Rather, it argued that it was entitled to tolling of the limitations periods under the discovery rule and the fraudulent concealment statute, G. L. c. 260, § 12, because it could not reasonably have discovered the identity of those responsible for its injury until 2013, when it obtained documents related to the Wells Fargo loan.¹¹

AA & D did not argue in its oppositions, as it argues now, that count VI included an action on an unsatisfied judgment and was subject to a twenty-year period of limitations. See G. L. c. 235, § 19.¹² The motion judge therefore did not address that issue. After judgment entered, AA & D filed a motion to reconsider in which it raised this claim for the first time. No action appears to have been taken on the motion for reconsideration, nor was it the subject of a notice of appeal. We decline to address the issue. See Commissioner of Rev. v. Comcast Corp., 453 Mass. 293, 312-313, 901 N.E.2d 1185 (2009) (new legal theory presented for the first time in motion for reconsideration is waived).

The motion judge concluded that AA & D's claims are time-barred because no tolling applies, and dismissed the complaint pursuant to Mass.R.Civ.P. 12(b)(6). On appeal, AA & D does not challenge the dismissal of count one. For substantially the reasons articulated by the judge, we conclude that the statutes of limitations on AA & D's remaining claims were not tolled. We therefore affirm the judgment of dismissal.

Discussion. "We review the allowance of a motion to dismiss de novo, accepting the allegations in the complaint as true and drawing all reasonable inferences in the plaintiff's favor." Harrington v. Costello, 467 Mass. 720, 724, 7 N.E.3d 449 (2014). "To survive a motion to dismiss, the facts contained in the complaint, and the reasonable inferences drawn therefrom, must " ‘plausibly suggest[ ]" ... an entitlement to relief.’ " Flagg v. AliMed, Inc., 466 Mass. 23, 26-27, 992 N.E.2d 354 (2013), quoting from Iannacchino v. Ford Motor Co., 451 Mass. 623, 636, 888 N.E.2d 879 (2008).

1. The discovery rule. The Supreme Judicial Court has adopted "a discovery rule for the purpose of determining when a cause of action accrues, and thus when the statute of limitations starts to run." Bowen v. Eli Lilly & Co., 408...