Chuduk v. Avraamov

• Decision Date: 08 February 2019
• Docket Number: 17-P-1504
• Citation: 123 N.E.3d 801 (Table),94 Mass.App.Ct. 1121
• Parties: Aleksandr CHUDUK v. Maxim AVRAAMOV & others.
• Court: Appeals Court of Massachusetts

94 Mass.App.Ct. 1121

123 N.E.3d 801 (Table)

Aleksandr CHUDUK

v.Maxim AVRAAMOV & others.¹

17-P-1504

Appeals Court of Massachusetts.

Entered: February 8, 2019

MEMORANDUM AND ORDER PURSUANT TO RULE 1:28

The plaintiff, Aleksandr Chuduk, an owner of a trucking corporation, Fair Port, Inc. (Fair Port), appeals from a Superior Court judgment. He argues that the judge erred in allowing the defendants' motions for summary judgment and abused her discretion by denying his motion to amend the complaint and striking his reply briefs. The lawsuit arises out of defendant Maxim Avraamov's embezzlement of money and other property from Fair Port. Because the claims against Avraamov for breach of contract and the claims arising from those breaches -- breach of the duty of good faith and fair dealing, constructive trust, and restitution -- and the claim of violation of G. L. c. 93A state injuries to the plaintiff personally, we reverse the judgment as to those counts. We affirm the remainder of the judgment.

1. Standard of review. "Summary judgment is appropriate where there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law." Caira v. Zurich Am. Ins. Co., 91 Mass. App. Ct. 374, 380 (2017). See Biewald v. Seven Ten Storage Software, Inc., 94 Mass. App. Ct. 376, 382 (2018). "We review a decision to grant summary judgment de novo, construing all facts in favor of the nonmoving party." Caira, supra at 380-381. See Deutsche Bank Nat'l Trust Co. v. Fitchburg Capital, LLC, 471 Mass. 248, 252-253 (2015). "In deciding a motion for summary judgment the court may consider the pleadings, depositions, answers to interrogatories, admissions on file, and affidavits." Niles v. Huntington Controls, Inc., 92 Mass. App. Ct. 15, 18 (2017).

2. Direct or derivative suit. As a matter of Delaware law, whether a claim is direct or derivative "turns solely on: ‘(1) who suffered the alleged harm (the corporation or the suing stockholders, individually); and (2) who would receive the benefit of any recovery or other remedy (the corporation or the suing stockholders, individually).’ "³ Askenazy v. KPMG LLP, 83 Mass. App. Ct. 649, 652 (2013), quoting Tooley v. Donaldson, Lufkin & Jenrette, Inc., 845 A.2d 1031, 1033 (Del. 2004). Here, many of the plaintiff's claims against Avraamov and his wife, defendant Oleysa Avraamova, are premised on wrongs Avraamov committed against Fair Port. For these claims, the plaintiff cannot properly bring a direct suit against Avraamov and Avraamova because it is Fair Port, not the plaintiff, that suffered the harm and would receive the benefit of any recovery. See Culverhouse v. Paulson & Co., 133 A.3d 195, 198-199 (Del. 2016). Avraamov wrote and cashed at least forty fraudulent checks, all charged to Fair Port, totaling $ 47,362. Avraamov also deposited checks into a bank account that he had surreptitiously created, rather than depositing the money into Fair Port's account. Avraamov deposited at least seventeen checks into this secret account, stealing approximately $ 59,440.90. The plaintiff's claims against Avraamov for breach of fiduciary duty, fraud, deceit, and negligent misrepresentation, and his claims against Avraamov and Avraamova for money had and received all are premised on these thefts from Fair Port. Despite the plaintiff's ownership of Fair Port and his contractual claim to the first $ 200,000 of Fair Port's profits, the fact remains that Avraamov stole from Fair Port, not from the plaintiff, and Fair Port, not the plaintiff, would be entitled to repayment. See Quarterman v. Springfield, 91 Mass. App. Ct. 254, 262 (2017) ("As a general rule, a shareholder does not have standing to sue to redress an injury to the corporation in which he holds an interest").

Moreover, the plaintiff could not have successfully prosecuted a derivative lawsuit under Delaware law. "[T]he right of a stockholder to prosecute a derivative suit is limited to situations where the stockholder has demanded that the directors pursue the corporate claim and they have wrongfully refused to do so or where demand is excused because the directors are incapable of making an impartial decision regarding such litigation." Rales v. Blasband, 634 A.2d 927, 932 (Del. 1993). Here, at the time of the suit, the plaintiff and possibly Alexander Merk were the sole owners and shareholders of Fair Port and could have caused Fair Port to bring suit. See id. at 934 n.9 (stockholder may bring derivative suit against third party on behalf of corporation but demand should not be automatically excused). Had Fair Port sued to collect damages, the plaintiff ultimately would have benefited. Nonetheless, the plaintiff, as an individual, may not bring either a direct or derivative suit on behalf of a corporation he controls.

3. Breach of contract; breach of duty of good faith and fair dealing; and restitution. In early 2011, the plaintiff and Avraamov entered into an oral contract to establish Fair Port as joint owners, each owning fifty per cent of the corporation's shares.⁴ As part of this agreement, the plaintiff dissolved Freightport, Inc. (Freightport), and allowed Fair Port to take over all of Freightport's prior business. The parties agreed that the first $ 200,000 of profits received from Fair Port would be used to repay the plaintiff the money he had invested in Freightport, and that, after the plaintiff had recouped his investment, Fair Port profits would be shared equally.

Both the plaintiff and Avraamov can be considered promoters of Fair Port. A promoter of a corporation is one who "participates in the formation of a corporation or some other joint business venture, and takes steps to put it in a position to transact the business for which it is intended." Cafe La France, Inc. v. Schneider Sec., Inc., 281 F. Supp. 2d 361, 373 (D.R.I. 2003). A promoter "would be liable upon, and entitled to the benefit of, contracts that he had made in behalf of the corporation to be formed." Island Transp. Co. v. Cavanaugh, 54 Mass. App. Ct. 650, 654 (2002). On the other hand, a promoter would not be liable for breach of a contract that was made on behalf of the corporation where "the circumstances demonstrate that the other party looked only to the corporation for performance." Productora e Importadora de Papel, S.A. de C.V. v. Fleming, 376 Mass. 826, 836 (1978).

Here, the agreement that the plaintiff would recoup his investment before Avraamov received any profits of Fair Port was made as part of the agreement to form Fair Port. As a promoter of Fair Port, the plaintiff is entitled to the benefits of this contract he made with Avraamov "in behalf of the corporation to be formed." Island Transp. Co., 54 Mass. App. Ct. at 654. Avraamov, also as a promoter of Fair Port, is liable for breach of the same contract. See id. The contract made between the two required that Avraamov refrain from taking any money out of Fair Port before the plaintiff had recouped his investment,⁵ and thus this is not a contract where, at least for summary judgment purposes, the plaintiff looked only to the corporation for performance. See Productora e Importadora de Papel, S.A. de C.V., 376 Mass. at 836.⁶ Accordingly, summary judgment should not have been granted on this contract claim.

The plaintiff also has presented a genuine issue of material fact regarding Avraamov's breach of the contract winding up his interest in Fair Port. Prior to buying Avraamov's interest in Fair Port, the plaintiff and Merk entered into an agreement with Avraamov that he would transfer to the plaintiff the titles of eight trailers that the plaintiff and Avraamov held jointly, as well as registrations and related documents for two tractors that were held in the plaintiff's name, but were still in Avraamov's possession. Because these assets and documents were to be transferred to the plaintiff, not Fair Port, the plaintiff has raised a genuine issue whether Avraamov breached a contractual duty to the plaintiff personally to transfer the vehicles and related papers to him. See Donahue v. Draper, 22 Mass. App. Ct. 30, 41 (1986). Accordingly, summary judgment should not have been granted on this contract claim.

The plaintiff's claims of breach of the duty of good faith and fair dealing and restitution arise from the plaintiff's personal contract claims.⁷ "The covenant of good faith and fair dealing is implied in every contract." Brown v. Savings Bank Life Ins. Co. of Mass., 93 Mass. App. Ct. 572, 588 (2018). Because the plaintiff has raised a genuine issue of material fact as to whether Avraamov breached the contract to form Fair Port by embezzling money from Fair Port, the plaintiff's claim of breach of the duty of good faith and fair dealing survives summary judgment. See A.L. Prime Energy Consultant, Inc. v. Massachusetts Bay Transp. Auth., 479 Mass. 419, 434 (2018) (covenant of good faith and fair dealing requires that party to contract not destroy or injure another party's right to benefit of contract). Similarly, the plaintiff's claim for restitution follows for the breaches of both the contract to form Fair Port and the contract to wind up Avraamov's interest in Fair Port, as we permit the injured party in a breach of contract suit to recover " ‘restitution damages,’ that is, ‘an amount corresponding to any benefit conferred by the plaintiff upon the defendant in the performance of the contract disrupted by the defendant's breach.’ " Fecteau Benefits Group, Inc. v. Knox, 72 Mass. App. Ct. 204, 209 (2008), quoting Sullivan v. O'Connor, 363 Mass. 579, 583 (1973).

4. Constructive trust. A "constructive trust, implied by law as a result of mistake, violation of a fiduciary duty, or unjust enrichment, may be imposed, generally as between transferor and transferee, without proof of fraudulent intent." Cavadi v. DeYeso, 458 Mass. 615, 627 (2011). A constructive trust may be used to remedy a breach of contract where "failure to impose the trust would result in the unjust...