Barnes v. Zappia

• Decision Date: 26 May 1995
• Parties: Donald E. BARNES and Bernard J. O'Neill v. Joseph ZAPPIA et al.
• Court: Maine Supreme Court

Page 1086

658 A.2d 1086

Donald E. BARNES and Bernard J. O'Neill v. Joseph ZAPPIA et al.

Supreme Judicial Court of Maine.

Argued Feb. 28, 1995.

Decided May 26, 1995.

John S. Campbell (orally), Poulos & Campbell, P.A., Portland, for plaintiffs.

Jeffrey A. Thaler (orally), Berman & Simmons, P.A., Lewiston, Christian T. Chandler (orally), Curtis Thaxter Stevens Broder & Micoleau, Portland, for defendants.

Before WATHEN, C.J., and ROBERTS, GLASSMAN, CLIFFORD, RUDMAN, and DANA, JJ.

WATHEN, Chief Justice.

Plaintiffs Donald Barnes and Bernard O'Neill appeal from an order entered in the Superior Court (Cumberland County, Fritzsche, J.) granting a summary judgment on their claims of fraud, aiding and abetting fraud, interference with advantageous relationship, aiding and abetting interference with advantageous relationship, and intentional infliction of emotional distress in favor of defendants Charles E. Miller, Esq., John L. Carpenter, Esq., the law firm, Bernstein, Shur, Sawyer & Nelson, and Joseph Zappia. Plaintiffs contend that a summary judgment was precluded by the existence of genuine issues of material fact as to each of these claims. We disagree and affirm the judgment.

The record, as developed for the purpose of defendants' summary judgment motion, reveals the following facts: In the early 1970s Joseph Zappia and Donald Barnes formed United Fish Corporation. Zappia and Barnes had an unwritten understanding that, should Zappia decide to sell his stock, he would attempt to sell it to Barnes before selling it to another buyer. In 1978 Thomas McGough was hired as a full-time employee and in the early 1980s Barnes and Zappia agreed to sell McGough ten shares (about 7%) of United Fish stock. Barnes, Zappia and Thomas McGough entered into a stock redemption agreement which, among other things, limited the right to sell their stock to anyone except another shareholder.

Barnes worked to develop a market for wholesale fish in Philadelphia where he associated himself with Bernard O'Neill. In 1984 Thomas McGough and his brother James McGough asked Charles Miller, Esq., and his firm Bernstein, Shur (Lawyer Defendants) to prepare an offer to purchase the stock of United Fish from Zappia and Barnes. The offer was made, but Barnes refused to sell. Subsequently, Barnes and O'Neill privately agreed that Barnes would acquire Zappia's stock and then Barnes and O'Neill would enter into a five year contract to share the profits of United Fish.

By the spring of 1985, Zappia wanted to get out of the business because he had become concerned that the company's high volume of business in Philadelphia was placing United Fish at risk. On at least two occasions Zappia had told Barnes that he wanted to sell his shares in United Fish. Barnes said that, although he wanted to buy the shares, he was unable to do so, because he had pending legal problems and didn't have the money.

In April 1985, Thomas McGough approached Zappia concerning the purchase of his shares in United Fish. The McGoughs asked the Lawyer Defendants to represent them in the stock purchase. After negotiating price and other terms, Zappia agreed to sell his shares to Thomas and James McGough, without providing Barnes with any further opportunity to first buy the stock. The Lawyer Defendants prepared documents to form T.J, Inc., a corporation owned equally by Thomas and James McGough. James McGough applied to Key Bank for a loan to enable T.J., Inc. to purchase Zappia's stock. Key Bank denied the request to finance because it believed that if the transaction were completed the McGoughs would attempt to discharge Barnes who, as a minority stockholder, would probably create problems for the McGoughs. Key Bank advised James McGough that it would consider making a loan only if an amicable agreement could be made with Barnes that would eliminate the possibility of Barnes taking an adversary position.

The Lawyer Defendants drafted two separate contracts for the purchase of stock from Zappia and Barnes. Both contracts listed Thomas McGough as purchaser and provided that the buyer was free to assign his rights "to any other person or entity prior to the closing without the written consent of the Seller." Both contracts contained irrevocable 30 day proxies in favor of James McGough. On May 31, 1985, Zappia executed a purchase and sale agreement and a two year employment contract. The irrevocable proxy was amended to make it revocable within 30 days if the buyer decided not to close or the seller believed the buyer would not close. Barnes had not been informed of Zappia's negotiations with the McGoughs.

On May 31, 1985 Thomas McGough informed Barnes that he had bought Zappia's stock. Barnes was not told that the Key Bank financing for the purchase was contingent on an "amicable agreement" with him, and Zappia told Barnes that the sale was a "done deal." On June 3, at Barnes's request, Zappia met with Barnes and Peter Sang, Esq., corporate clerk of United Fish. Sang, with Zappia's consent, agreed to advise Barnes regarding the legality of the sale to Thomas McGough. Based on Zappia's representations, Barnes and Sang believed that the McGoughs had gained control of the corporation. A notice of a special shareholders' meeting on Tuesday, June 4, 1985, for the purpose of ratifying the sale, had already been delivered to Sang. Sang advised Barnes that the stock redemption agreement did not prohibit either Zappia's sale of the stock to Thomas McGough or Zappia's transfer of his proxy to James McGough. At this meeting, Barnes made a tentative decision to sell, and he and Sang met later that same day with the Lawyer Defendants to negotiate and sign a purchase and sale agreement.

At that meeting, Lawyer Defendants Miller and Carpenter provided Barnes with drafts of a purchase and sale agreement, and a one year employment contract. The agreement contained a 30 day irrevocable proxy that did not include the amendment that had been included in Zappia's proxy. The Lawyer Defendants did not have a copy of Zappia's contracts with them at the meeting and did not point out any differences between Barnes's and Zappia's proxies. At the request of Barnes and Sang, the proxy agreement was deleted and Barnes signed the documents.

Barnes, his attorney Sang, the Lawyer Defendants, the McGoughs, Zappia, and his lawyer Robert Stevens attended the shareholders' meeting on June 4 in the offices of Bernstein and Shur. Both Barnes's and Zappia's purchase and sale agreements were ratified. Sang asked Zappia's attorney, Stevens, for a copy of Zappia's contracts and Stevens said it was not necessary to have a copy since the provisions were identical to those in Barnes's contract. Miller overheard this exchange and either nodded his head or said something affirmative. As a result, Sang did not see Zappia's contracts.

On June 27, 1985, separate closings were held with Zappia and Barnes. At the first closing, Zappia signed a non-disclosure agreement providing that he would not discuss his closing with Barnes until after Barnes closed with T.J., Inc. Barnes and the McGoughs closed their sale later that same day. At that closing, Barnes asked Miller whether anything had changed in regard to the terms of the contracts, and he took Miller's assurance that nothing had changed to mean...