Galipault v. Wash Rock Investments, LLC

• Citation: 836 N.E.2d 1123,65 Mass. App. Ct. 73
• Decision Date: 07 November 2005
• Docket Number: No. 04-P-1662.,04-P-1662.
• Parties: Peter GALIPAULT & another<SMALL><SUP>1</SUP></SMALL> v. WASH ROCK INVESTMENTS, LLC, & others.<SMALL><SUP>2</SUP></SMALL>
• Court: United States State Supreme Judicial Court of Massachusetts

836 N.E.2d 1123

65 Mass. App. Ct. 73

Peter GALIPAULT & another¹ v. WASH ROCK INVESTMENTS, LLC, & others.²

No. 04-P-1662.

Appeals Court of Massachusetts, Suffolk.

Argued May 4, 2005.

Decided November 7, 2005.

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Catherine J. Savoie, Boston, for the plaintiffs.

Christian W. Habersaat, Boston, for HJB, Inc., & another.

John R. Shek, Boston, for Wash Rock Investments, LLC, & another.

Present: GELINAS, CYPHER, & TRAINOR, JJ.

GELINAS, J.

In this appeal we consider G.L. c. 184, § 15, as amended by St.2002, c. 496, § 2, and more especially the provisions for the expedited dissolution of an unjustified memorandum of lis pendens, for a special motion to dismiss, and for appeal pursuant to G.L. c. 231, § 118. The plaintiffs contend that a Superior Court judge erred as a matter of law, or abused his discretion, in dissolving a lis pendens and in dismissing their claims seeking injunctive relief and rescission of a real estate transaction. They also claim that the judge erred in dismissing their claim of breach of fiduciary duty by ruling that, as a matter of law, the members of the governing board of their condominium association owed no fiduciary duty to them as individual condominium unit owners; in dismissing their breach of contract count; and in awarding the defendants attorney's fees and costs. We affirm.

The plaintiffs, owners of a business condominium unit at 55 Temple Place in Boston, commenced this action in Superior Court in July, 2004. The original action was filed less than twenty-four hours prior to a real estate closing in which the defendant Wash Rock Investments, LLC (WRI), acting through its manager, the defendant James Lee, was to sell the remaining six units of the condominium to the defendant HJB, Inc. (HJB), as trustee of 330 Realty Trust. On the day following the filing of the complaint, after hearing, a judge denied the plaintiffs' request for injunctive relief. On the same day, and with full disclosure of the pending litigation, the real estate transaction went forward at the offices of counsel for defendant Eastern Bank, HJB's mortgage lender. Quitclaim deeds for the premises were recorded some three days later.

Approximately one month later, in mid-August, the plaintiffs filed a first amended verified complaint, together with a motion for judicial endorsement of a memorandum of lis pendens. After hearing, a different Superior Court judge allowed the plaintiffs' motion. The judge reserved, without prejudice, the defendants' rights to file a motion to dissolve the lis pendens. The endorsed memorandum of lis pendens was recorded forthwith, and remains of record.

On September 21, 2004, HJB filed an answer and a counterclaim against the plaintiffs seeking damages arising from the filing of the lis pendens, alleging interference with contractual relationship, intentional interference with advantageous business relations and prospective economic advantage, and abuse of process. HJB further cross-claimed against WRI and James Lee for breach of contract and misrepresentation. WRI filed an answer and counterclaim on September 27, 2004, alleging the same counterclaims as HJB, but adding claims for breach of express and implied contract. WRI also filed a cross-claim against HJB seeking indemnity and contribution.

In October, WRI filed a special motion to dismiss pursuant to G.L. c. 184, § 15(c),³ seeking an order (a) dismissing the plaintiffs' complaint (all counts); (b) dissolving the lis pendens; and (c) awarding defendants their reasonable attorney's fees and costs pursuant to G.L. c. 184, § 15(d). HJB filed a motion seeking the same relief.

Both motions to dismiss were heard by the judge who had heard and denied the plaintiffs' initial request for injunctive relief. On the following day the judge issued a memorandum of decision and order on the defendants' motions, dissolving the lis pendens, dismissing all counts of the plaintiffs' first amended complaint, and granting attorney's fees and costs to the defendants. After a presentation of evidence with respect to fees and costs, the judge awarded WRI and HJB a total of $70,949.27. On November 15, 2004, the plaintiffs filed their notice of appeal to a full panel of the Appeals Court pursuant to G.L. c. 184, § 15(d), and the second paragraph of G.L. c. 231, § 118. The case was entered on the docket of this court on December 10, 2004.

The condominium. The 55 Temple Place Condominium is a commercial office condominium comprising seven condominium units. The condominium was created by master deed recorded in 1982. The master deed created an unincorporated association of the condominium unit owners, the "55 Temple Place Association," named the initial board of managers of the association, and established the by-laws of the association, including a procedure for managing the condominium's affairs through the board of managers. Each unit owner of the condominium has the right to appoint a single member of the board of managers of the association.

The by-laws provide that the management of condominium business shall be governed by votes equal in weight "to the percentage of the undivided interest in the common areas and facilities" of the condominium held by the unit owners. A quorum for board action for all purposes other than a master deed amendment affecting the common areas requires seventy-five percent of the total voting interest.

During the time relevant to this dispute, WRI owned and controlled approximately eighty-five percent of the condominium common area and voting power, exceeding the seventy-five percent requirement. The plaintiffs owned approximately fifteen percent of the common area and voting power of the condominium. For the time that the condominium was owned by plaintiffs and WRI in this way (2001-2004), all actions requiring a vote of the condominium unit owners were achieved by written consent, signed by both, pursuant to the by-laws. While the parties differ with respect to whether appropriate formal notice of the proposed sale was given by WRI or waived by the plaintiffs, it is undisputed that WRI consulted consistently with the plaintiffs throughout 2001-2004 on all condominium business, including the sale to HJB that is the subject of this litigation.

The plaintiffs are husband and wife, and own and control the second-floor unit of the condominium in their individual names as joint tenants. As joint owners, their seat on the board is held jointly, as is their minority interest in the condominium association.

The master deed contains detailed provisions with respect to a right of first refusal that must be offered to the association, through its board of managers, by any unit owner wishing to sell his or her unit. These provisions include a requirement that the seller provide written notice to the board of managers of the terms of the proposed sale and to offer to sell the unit(s) to the board of managers or their assignee on the same terms. The board may purchase for the benefit of all unit owners, or may assign the right to any other unit owner. Any purported sale in violation of these provisions is voidable at the election of the board. The board may release or waive the right.

Sale by WRI. In April, 2003, the plaintiffs expressed an interest in purchasing WRI's units in the condominium. In May 2003, the plaintiff Galipault informed WRI's representatives that the plaintiffs no longer had any interest in purchasing the units,⁴ and indicated that the plaintiffs would assist in facilitating WRI's sale of its units to others.

In April, 2004, WRI entered into a purchase and sale (P & S) agreement with HJB for the sale of the six units for the sum of $1,460,000.

The plaintiffs were aware of the details of the agreement of sale with HJB, including the identity of the purchaser and the amount of the sale.⁵ No formal notice of the sale was given to the board of managers before WRI signed the P & S agreement. Galipault told WRI that although he believed that a notice of the possible sale should have been given before the P & S agreement was signed, WRI could "simply pre-date" such notice. WRI never considered such "pre-dating." Galipault also stated at this time that the plaintiffs would either supply a written consent to, or waiver of, their interest in the condominium board of managers' right of first refusal, and would assist in facilitating the sale to HJB.

On April 27, 2004, WRI provided formal notice to Lee, as a manager of the condominium board of managers, informing the board under the master deed that a bona fide offer to purchase all of WRI's units in the condominium had been received, and offering the units to the board on the same terms. The notice was duly acknowledged as received by the board of managers on April 27, 2004.

After learning of WRI's intended sale of its units to HJB in 2004, the plaintiffs began marketing their own unit. On or about June 2, 2004, Galipault advised WRI that the plaintiffs had received an offer from a bona fide purchaser, one Gilly Strauss, for $450,000. Although not set out in the written offer, Strauss conditioned the sale on a review of the condominium documents and his approval of them. After review, Strauss required that as a condition of the sale, certain changes be made to the condominium documents. The plaintiffs accepted the offer, subject to the conditions, and they advised WRI that they were prepared to accept the offer. At this time, the plaintiffs did not advise WRI that Strauss required these amendments, but they informed WRI of the required changes just prior to the closing on the plaintiffs' unit.

The plaintiffs had agreed to obtain the proposed condominium document amendments despite their knowledge that (a) acting alone they lacked the necessary authority to obtain the amendments; (b) the plaintiffs did not possess any agreement with WRI regarding amendments; and (c) WRI had entered into the P & S...