Barrows v. Boles

• Decision Date: 07 November 1996
• Docket Number: No. 92-254,92-254
• Citation: 141 N.H. 382,687 A.2d 979
• Parties: Jerry BARROWS v. Ralph BOLES and another. BARCO DEVELOPMENT CORPORATION v. Ralph BOLES and another.
• Court: New Hampshire Supreme Court

Page 979

687 A.2d 979

141 N.H. 382

Jerry BARROWS v. Ralph BOLES and another.

BARCO DEVELOPMENT CORPORATION v. Ralph BOLES and another.

No. 92-254.

Supreme Court of New Hampshire.

Nov. 7, 1996.

As Amended on Denial of Rehearing

Feb. 20, 1997.

Nighswander, Martin & Mitchell, Lebanon (R. Peter Decato, on the brief and orally), for plaintiff Jerry Barrows.

Barco Development Corporation filed no brief.

Richard B. Laschever, by brief, pro se.

Jerome Diamond joins in the brief of Richard B. Laschever, and orally, pro se.

Ralph Boles, Irene Boles, Raymond Factor, Doris Factor, Arnold Bernstein, Claire Tamkin, Robert Cohen, Bernard Shectman, Mike Donza, Hamilton Krans, Edna Krans, Gene Lavigne, and Albert Lavigne, all of whom appear pro se, join in the brief of Richard B. Laschever.

J.J. Bosco Cardoza filed no brief.

HORTON, Justice.

This appeal arises in the context of a complex procedural scenario, and involves issues of lender liability, contract, and bankruptcy. An extensive recitation of the factual and procedural background of this case is necessary for our disposition of the issues on appeal. We affirm.

I. Facts and Procedure

Jerry Barrows, one of the plaintiffs in this action, owned several adjacent parcels of land in Winchester, including a mobile home park, a 0.3-acre parcel on which he built his office (Lot I), and a six-acre piece of unimproved land (Lot II). In 1988, Barrows was involved in developing a condominium project on land abutting the mobile home park. When Barrows sought financing for the project, he was introduced to Richard Laschever, a Connecticut lawyer and one of the defendants in this case. Laschever acted as a finder and attorney for investors interested in providing financing for Barrows' project. Laschever assembled a group of fourteen investors, ostensibly led by Jerome Diamond, and collectively known as "the Diamond Group." Diamond, Laschever, and two investors, Ralph M. Boles and Arnold Bernstein, were the only active participants in negotiations with Barrows. The other defendants, Irene B. Boles, Raymond Factor, Doris Factor, Claire Tamkin, Robert Cohen, Bernard Shectman, Mike Donza, Gene Lavigne, Hamilton Krans, Edna Krans, J.J. Bosco Cardoza, and Albert Lavigne, were simply passive investors with no personal knowledge of the negotiations with Barrows.

Laschever arrived at a tentative financing proposal with Barrows in early September 1988. When Laschever approached the Diamond Group with this proposal they sought more favorable terms. On September 20, 1988, Diamond, Laschever, Boles, Bernstein, and Barrows met to finalize the details of the financing proposal and to close the loan. The parties entered into a written agreement (the September 20 agreement) in which Barrows received $650,000 at closing and would receive an additional $100,000 after completion of a model, consisting of three condominium units (the triplex), to be shown to prospective purchasers. The agreement provided for eighteen percent interest on the loan with six points to be paid at closing. Additionally, the Diamond Group received a first mortgage on Lots I and II, a second mortgage on the adjacent mobile home park, and a second mortgage on another park which Barrows owned. The agreement also provided that the Diamond Group would subordinate its interest in Lot I to a $200,000 mortgage to a financial institution after Barrows had repaid $70,000. On September 20, 1990, Barrows was scheduled to repay the entire $750,000 principal balance.

After the triplex was placed on the foundation, Barrows requested the remaining $100,000, but Diamond refused, insisting that the money would not be forthcoming until the model was complete. In order to resolve this dispute, the parties modified their September 20 agreement on November 28, 1988. As part of the November 28 agreement, the Diamond Group agreed to subordinate their mortgage on Lot I to a new $230,000 mortgage on that lot in favor of Barco Development Corporation (Barco), a corporation wholly owned and controlled by Barrows. In exchange, Diamond was relieved of its obligation to disburse the final $100,000 under the September 20 agreement. Barrows' intention was to borrow $230,000 from another lender and use Barco's mortgage as security.

Between December 1988 and February 1989, Barrows made no interest payments under the September 20 agreement, and in March 1989, the Diamond Group notified Barrows that they would foreclose on their mortgages unless Barrows brought his payments up to date. Barrows made the December 1988 payment in March 1989. At the same time, Barrows was negotiating with the Money Store for a $104,000 loan, but the Money Store would not accept Barco's $230,000 mortgage as security. As a result, Barrows and the Diamond Group again modified the agreement. The Diamond Group agreed to subordinate its mortgage on Lot I to a $104,000 mortgage from Barrows to the Money Store. Barrows gave the Diamond Group a discharge of Barco's $230,000 mortgage, which Laschever was instructed to hold in escrow until Barco received a new $130,000 mortgage and the Diamond Group provided a subordination agreement in Barco's favor. Barrows agreed to use approximately $30,000 of the Money Store proceeds to bring his payments under the September 20 agreement up to date. The Diamond Group agreed to forbear from foreclosing on the mortgages under the September 20 agreement. Finally, the Diamond Group agreed to subordinate all of their mortgages to a $1,750,000 construction loan on terms acceptable to them when Barrows obtained the construction loan.

The Diamond Group provided the subordination agreement to the Money Store, but Barrows failed to pay the arrearage under the September 20 agreement from the proceeds of the Money Store loan. Laschever, on the other hand, filed the discharge of the $230,000 Barco mortgage without the $130,000 mortgage in Barco's favor being in place. On May 24, 1989, the parties again entered into negotiations to solve their differences. Under the May 24 agreement, instead of subordinating its mortgages to a $1.75 million construction loan, the Diamond Group agreed to lend Barrows up to $500,000: $250,000 at eighteen percent interest and ten points to be disbursed at the June 1 closing, and additional advances of up to $250,000 to be made at the sole discretion of the lenders. The Diamond Group immediately provided Barrows with $100,000, in exchange for which Barrows agreed to waive any claim against the Diamond Group for its failure to disburse $100,000 under the September 20 agreement. At the June 1 closing, Barrows refused to sign the promissory note because it called for him to pay $500,000 within sixty days. Relations between the parties deteriorated further, and on October 20, 1989, the Diamond Group issued a notice of foreclosure to Barrows under the mortgages granted pursuant to the September 20 agreement.

On October 30, 1989, Barrows filed a petition for injunctive and other relief to prevent the defendants from foreclosing. Barrows' petition also sought damages, alleging: (1) that the defendants breached the September 20 agreement; (2) that the defendants breached the May 24 agreement; (3) that the defendants breached their agreement in March 1989 that they would subordinate their $650,000 mortgages to a $1,750,000 mortgage; (4) that the defendants intentionally interfered with Barrows' contractual relations with his tenants by sending a letter to the tenants before the foreclosure sale was finalized; (5) that the defendants acted fraudulently in inducing Barrows to enter into the September 20 and May 24 agreements; and (6) that the defendants' acts violated the Consumer Protection Act, RSA chapter 358-A.

On November 14, 1989, the Superior Court (Mangones, J.) granted a temporary restraining order (TRO) on the condition that Barrows post a $25,500 bond and ordered that a hearing on the merits would be held within sixty days. On November 17, 1989, the court ordered the amount of the bond to be increased by $6,000. On January 6, 1990, the court vacated the TRO and denied Barrows' request for a preliminary injunction. The court subsequently denied Barrows' motion for reconsideration. In December 1992, the court refused to release the bond, ordering that it be held to cover damages incurred by the Diamond Group as a result of the TRO.

On January 19, 1990, Barrows filed a voluntary petition for bankruptcy under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of New Hampshire. The defendants' foreclosure of Barrows' property was automatically stayed pursuant to 11 U.S.C. § 362(a) (1988) (amended 1994). On May 17, 1990, however, the bankruptcy court granted the defendants' request for relief from the stay. Barco then filed suit against the defendants in superior court seeking specific performance to force the defendants to subordinate their mortgage in Lot I to Barco's $130,000 mortgage. The defendants were allowed by the bankruptcy court to go forward with the foreclosure sale, which took place on June 22, 1990. In September 1991, Barrows, on behalf of Barco, filed a motion for ex parte attachment of the proceeds of the foreclosure sale. This motion was denied without explanation by the superior court. The defendants subsequently counterclaimed against Barrows for the deficiency owed by him under the parties' agreements.

In July 1990, Barrows' Chapter 11 bankruptcy petition was converted to a Chapter 7 petition, and Dennis Bezanson was appointed bankruptcy trustee for the estate of Barrows. Barrows and the defendants subsequently filed a joint motion to lift the automatic stay on the State court lawsuit and allow the case to go to trial. In that motion, both parties requested that any judgment be treated as an unsecured pre-petition claim. In December 1990, the bankruptcy court granted the joint motion. The trustee assented to this motion. Prior to trial, the...