Demoulas v. Demoulas

• Decision Date: 22 December 1998
• Parties: , 37 UCC Rep.Serv.2d 376 Rafaele L. DEMOULAS, administratrix, 1 & others 2 v. Telemachus A. DEMOULAS & others. 3
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 1149

703 N.E.2d 1149

428 Mass. 555, 37 UCC Rep.Serv.2d 376

Rafaele L. DEMOULAS, administratrix, ¹ &amp others ² v. Telemachus A. DEMOULAS & others. ³

Supreme Judicial Court of Massachusetts Middlesex.

Argued Sept. 3, 1998.

Decided Dec. 22, 1998.

Edward J. Barshak, Boston (Susan A. Hartnett and Christine M. Netski, with him), for Demoulas Super Markets, Inc.

Toni G. Wolfman, Boston (Judith Gail Dein, with her), for Arthur T. Demoulas & others.

Robert C. Gerrard, Boston (Anthony R. Pelusi, Jr., Cambridge, Carol R. Cohen and Thomas S. Fitzpatrick, Boston, with him), for Rafaele L. Demoulas.

Before WILKINS, C.J., and ABRAMS, LYNCH, GREANEY, FRIED, MARSHALL and IRELAND, JJ.

GREANEY, Justice.

We granted an application for direct appellate review to consider the appeal by the defendants from the second amended judgment entered in this case on September 2, 1997. In a related case, Demoulas v. Demoulas Super Mkts., Inc., 424 Mass. 501, 677 N.E.2d 159 (1997) (Demoulas I ), we affirmed, for the most part, judgments entered in stockholder derivative and contempt actions. We upheld the judge's conclusions that Telemachus A. Demoulas (Telemachus), the primary defendant in this case, and other defendants (several of whom are also defendants in this case), had participated in, or benefited from, numerous improper diversions of corporate opportunities and self-dealing transactions to the detriment of Demoulas Super Markets, Inc. (DSM), and other corporations and businesses. We concluded as well that the judge had correctly based her remedies for the many wrongs committed on the principle of preventing unjust enrichment, and that she appropriately ordered (with certain adjustments) rescission of the improper transactions and disgorgement of wrongful gains. We also affirmed a judgment of contempt against DSM for violating an injunction through the wrongful payout of undistributed corporate earnings.

In this action, the widow and children of George Demoulas (George), the brother of Telemachus, charged that Telemachus, acting for himself, DSM, and his children (defendant children), had used wrongful means to acquire a greater share of ownership in DSM and other entities, at the expense of members of George's family. The case was tried to a jury. At the conclusion of the plaintiffs' case, a motion for directed verdict filed by the defendant children was allowed, and the jury did not consider the plaintiffs' claims against them. The jury returned answers to special questions on the plaintiffs' remaining claims and found that Telemachus had committed fraud, conversion, and breach of fiduciary duties with respect to substantial estate and trust assets. The jury went on to conclude, in great detail, that Telemachus's considerable wrongdoing included the transfer, purchase, and redemption of DSM and other stock belonging to George's widow, Evanthea Demoulas (Evanthea), and Evanthea and George's children (plaintiff children), the other plaintiffs, as well as wrongdoing in connection with the ownership of real estate. Among other effects, the result of the misdeeds found by the jury was, over a period of time, to increase the proportion of DSM stock in the control of Telemachus's side of the family to 92%, to the almost total exclusion of George's side of the family.

Based on the jury's findings, the judge, after lengthy and contentious posttrial hearings, ordered relief essentially in the form of rescission and reformation. On appeal, the defendants do not dispute that the jury's findings were warranted on the evidence they heard. Telemachus maintains, however, that there must be a new trial for several reasons. The defendant children claim that it was error for the judge to impose a constructive trust on DSM stock they own, and to reform a real estate partnership to take away some of their ownership. DSM challenges a ruling concerning redemption of some of its shares and contests the relief ordered against it. The respective arguments of the defendants will be explained as we resolve the issues in each of the three appeals. ⁴ We conclude that Telemachus and DSM make no argument that entitles them to judgment in their favor or a new trial. We also conclude that the defendant children are entitled to an evidentiary hearing to decide whether they were bona fide purchasers of the DSM stock and partnership interests they acquired.

APPEAL OF TELEMACHUS.

1. Telemachus contends that there must be a new trial because the judge failed to grant the defendants the correct number of peremptory challenges. The background necessary to resolution of this issue is as follows.

The trial posed a challenge for the judge in terms of its complexity and the need to deal with the considerable acrimony between the parties. The plaintiffs' fourth amended complaint was 125 pages long, and a voluminous file of pretrial pleadings had been assembled. There were teams of lawyers on each side. It was anticipated that the trial would be long. (It lasted eighty-five days. There were seventy-two days of actual trial, and the jury deliberated for thirteen days and delivered twenty-six pages of findings in answer to special questions.)

The judge held a pretrial conference which was recorded. At that conference, the allotment of peremptory challenges was discussed in connection with the judge's decision (agreed to by all counsel) to empanel a jury of sixteen members.

At the time of trial, there were five plaintiffs, and six defendants. There was considerable indecision and disagreement on the part of all counsel as to the proper number of peremptory challenges available to each side. One of the plaintiffs' counsel thought that requirements governing the number of peremptory challenges, when a jury of sixteen members are selected, called for twenty-four challenges. Another of the plaintiffs' counsel stated that, the plaintiffs' team had done "the math," and the team had concluded that each side should get 120 peremptory challenges. In response to this proposition, the judge stated, "It is not going to happen." Counsel for Telemachus (acting on behalf of all defendants) stated that he wanted to "check [the] Rule," before agreeing to a prescribed number of peremptory challenges because, as he said, "each one of [the defendants] has his or her own peremptories." The judge concluded the disagreement among counsel with the following ruling: "Well, whatever the Rule is, I am going to be efficient here. I think, having given it a little thought before you all came in here, I think you are each [meaning each side] going to get twenty-five." The plaintiffs accepted this allotment. Counsel for Telemachus (still acting on behalf of all the defendants) did not, and he stated his opinion that the defendants were entitled to five more challenges.

Jury selection proceeded. The plaintiffs' counsel exercised twenty peremptory challenges. Counsel for Telemachus exercised all twenty-five challenges granted by the judge, and was denied the five additional challenges to which he claimed the defendants were entitled. He later argued to the judge that the defendants "would have used some or all of [the five additional claimed challenges]" in selecting the jury if they had been granted, but he failed to designate which juror or jurors in the final seating would have been struck had the extra challenges been made available.

The matter of peremptory challenges in a civil case is governed by G.L. c. 234, § 29, which states that "each party shall be entitled to four peremptory challenges," and by Mass. R. Civ. P. 47(b), 365 Mass. 812 (1974), which states, in pertinent part, that, in addition to the challenges allowed by the statute, "[e]ach side [will be] entitled to ... 2 peremptory challenges if 3 or 4 additional jurors are to be impanelled." There is a difference between the language of the statute ("each party"), and that of the rule ("each side"). "Although Rule 47(b), in setting forth the right to additional peremptory challenges when additional jurors are impaneled, talks of each 'side ' (as opposed to 'party '), no sound reason precludes allowing the additional challenges to each party entitled to the four initial peremptory challenges (although on the same side of the versus )." J.W. Smith & H.B. Zobel, Rules Practice § 47.4, at 167-168 (1977 & Supp.1998).

Reading the statute and the rule to give them consistency, we calculate that the plaintiffs and the defendants should have had thirty-six peremptory challenges on each side. ⁵ In arguing that there must be a new trial because the defendants were deprived of additional peremptory challenges, Telemachus relies primarily on criminal cases where we have carefully scrutinized any claimed errors with respect to such challenges in order to protect the liberty interests of defendants. A representative list of decisions which he cites is set forth in the margin. ⁶

This case stands on a different footing. In a civil case, " 'a refusal to allow the proper number of peremptory challenges [is] regarded as immaterial in the absence of a showing that the party affected was required to accept one or more jurors whom he wished to challenge' (Tamburello v. Welch, 392 S.W.2d 114, 116 [Tex. 1965] ), or in the absence of a showing that the ruling affected the jury's verdict in some material way. Id. at 117-118." Andras v. Marcyoniak, 13 Mass.App.Ct. 1043, 1044, 433 N.E.2d 1260 (1982), citing Upchurch v. Barnes, 197 So.2d 26, 27-28 (Fla.Dist.Ct.App.1967). Cf. Rickett v. Hayes, 256 Ark. 893, 895-896, 511 S.W.2d 187 (1974). When a new trial is sought in a civil case because of a miscalculation in the number of peremptory challenges, a measure of discretion exists in deciding whether either of these factors has been clearly demonstrated by the complaining party. See Andras v. Marcyoniak, supra, and cases cited. On the procedural background previously set forth, there has been no showing of error that would require a retrial.

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