Grandmaison v. Slattery
| Decision Date | 25 April 2012 |
| Docket Number | NO. 217-2010-CV-5006,217-2010-CV-5006 |
| Parties | Ansel Grandmaison v. Kevin Slattery, Bernard N. Plante, Edgebrook Heights, LLC, and Melton Associates, LLC |
| Court | New Hampshire Superior Court |
This action involves former partners in a joint venture and was brought in five counts: (1) breach of partnership and/or joint venture; (2) intentional and/or fraudulent misrepresentation; (3) breach of fiduciary obligation; (4) conversion; and (5) violation of New Hampshire's Consumer Protection Act ("CPA") RSA 358-A. In substance, the Plaintiff, Ansel Grandmaison ("Grandmaison"), seeks an accounting of his share of partnership assets. For the reasons stated in this Order, the Court finds for Grandmaison and assesses his share of the partnership interest at $143,552, plus interest at the lawful rate on judgments under RSA 336:1 II from August 15, 2006 until Grandmaison filed this action.
Grandmaison and Defendants, Bernard Plante ("Plante") and Kevin Slattery ("Slattery"), all knew each other for many years. Grandmaison was a scrap metal dealer and the Defendants were in the real estate development business. The parties had worked together on various business transactions through the years. On January 15,2006, Grandmaison approached Plante and Slattery and told them he had learned of two unassembled commercial buildings stored in Massachusetts, owned by Cisco Systems ("Cisco"). Apparently, Cisco had purchased steel in order to build two office buildings, and then Cisco decided not to complete the structures. Cisco wanted to sell the steel as scrap and have it removed. Cisco contacted Grandmaison for this. Grandmaison came up with the idea of buying the unassembled steel building components and then re-selling them.
He contacted Plante and Slattery. The three had a general discussion and agreed that they would set up a partnership under which they would each have a one-third ownership interest in the steel. The parties then put together a rough outline of the business deal. They secured use of the name "Burch Street Steel, LLC" ("Burch Street") for their joint venture. The parties eventually drafted an operating agreement, but none of them ever executed it, and none of the parties ever registered the partnership with the Secretary of State.1 Rather, evidence of the terms of the parties' agreement is by stipulation and admission only. The purpose of the partnership was to sell the steel retrieved from Cisco as two whole unassembled buildings. The partners agreed that all of the expenses and profits would be shared equally. The partners understood that Grandmaison would be responsible for managing and organizing removal of the steel from Cisco's warehouse, and Plante and Slattery would "front" the costs for that effort. Pl.'s Am. Post-Trial Mem. 1-2.
Within days of this initial discussion, the partners struck a deal with Cisco that required the 1,400 tons of steel be removed by March 15, 2006. As part of their agreement, Melton Associates, LLC ("Melton"), an entity organized and owned exclusively by Plante and Slattery, executed a Bill of Sale and Agreement for the purchase of Cisco's steel. The actual purchase price for the steel was $135,000. In addition, Burch Street paid $75,000 for the HVAC units for the two unassembled buildings.
The purchase price started at $205,000 but Cisco refunded $50,000 when the parties removed the steel by Cisco's pre-set deadline of March 15, 2006. It also paid Scrap Metal Inc., Grandmaison's business, $20,000 when the transportation was completed according to the terms of the transportation agreement.2 Grandmaison worked consistently from January until March of 2006 to transfer all the steel out of Cisco's warehouse by the Cisco-imposed deadline. The parties dispute how this relocation was financed.
According to Grandmaison, because Melton already carried insurance, Plante simply added the vehicles used by Grandmaison to Melton's existing insurance policy. Melton paid movers through its existing personnel system, and it financed transportation costs. Additionally, the parties rented space to store the steel and insured it. From Plante's testimony, it appears that that the cost of moving the steel was mostly borne by the partnership through Melton, by Plante's relatives, and by Plante's other businesses, which reimbursed his and Slattery's employees involved in relocating the steel.Nonetheless, Grandmaison represents, and the partners do not dispute, that he used his own equipment and man hours from his business to move the steel. Grandmaison never billed for his time, equipment, or fuel spent in transporting the steel to a leased storage location. Pl.'s Am. Post-Trial Mem. 4-5. Grandmaison never billed for this time because the partners had agreed they would not bill Burch Street for their individual labor. Grandmaison could not quantify the expense, but testified that the move cost his business six weeks of time and some equipment use.
In April of 2006, Burch Street believed it would be able to sell or lease-to-sell one or both of the buildings to Cabot, Cabot, and Forbes (CC&F), a real estate company. The approximate value of this deal was $1.7 million and included further transportation of the structures. This deal did not go through, and Burch Street was left with the continuing carrying costs of storing and insuring the steel. Shortly after this deal fell through, in May of 2006, with no buyer in sight and carrying costs mounting, Plante and Slattery began discussing the possibility of a deal with Gutierrez Construction Co. ("Gutierrez").
By that time, it was apparent to Plante and Slattery that Grandmaison would not be able to honor his agreement to contribute to the partnership's expenses. In fact, Grandmaison admitted that he "did not, at any time during 2006, have the financial capacity to contribute his 1/3 share of the costs to purchase, transport and store the Cisco Buildings." Pl.'s Resp. to Req. for Admis. ¶ 22. Between April 10, 2006 and June 12, 2006, Grandmaison had transferred $90,000 to Melton as his contribution to Burch Street. Grandmaison had to borrow part of this $90,000. By the summer of 2006, Plante and Slattery had both invested approximately $250,000 in the deal, and BurchStreet was paying storage costs on a monthly basis. Plante and Slattery approached Grandmaison on several occasions attempting to buy him out or settle his debt to the partnership. Grandmaison rebuffed all such attempts. The parties introduced settlement negotiations, without objection, to establish Plante and Slattery's good faith attempts to negotiate or settle.
Grandmaison claims that "[a]ccording to the Defendants' accounting records . . . Grandmaison's contribution of cash, time and labor closely approximated the investments made by Slattery and Plante as of June 1, 2006." Pl.'s Am. Post-Trial Mem. 4. The Court does not credit this testimony. What is undisputed is that Grandmaison had invested only $90,000, far less than the $250,000 contributed by Plane and Slattery, and he did not have the ability to invest further funds despite his representations to the contrary.
Eventually, Plante and Slattery met with Gutierrez about selling the steel. Gutierrez declined to buy the steel but offered to swap it for approximately 32 acres of commercial property Gutierrez owned in Merrimack, New Hampshire ("Merrimack properties"). By June 8, 2006, Plante was actively negotiating with Gutierrez. Slattery and Plante are experienced real estate developers but are not in the business of building, owning, or selling commercial buildings. Thus, they believed the best opportunity they had to get out of the steel business was to swap the steel with Gutierrez for property. In fact, Grandmaison agreed with this decision; "Grandmaison did not object to the Gutierrez transaction, instead he thought it was a good idea." Pl.'s Am. Post-Trial Mem. 11.
On July 18, 2006, Slattery met with Grandmaison and told him that the he was not welcome to remain in the partnership. Slattery testified that he explained to Grandmaison that it made no sense for Grandmaison to remain in the partnership as the only avenue left for sale of the steel was likely via a land swap transaction. Moreover, Grandmaison did not have the financial resources necessary to contribute to a land development venture. On July 27, 2006, Plante and Slattery formed Edgebrook Heights, LLC ("Edgebrook").
Some time shortly after Grandmaison and Slattery met in July of 2006, Plante offered Grandmaison $500,000 on behalf of himself and Slattery to give up his interest in Burch Street. This offer is significantly higher than a one-third interest in $967,500, the stipulated value of the real estate on August 15, 2006, even excluding the expenses of $538,423 the parties hae stipulated were incurred by that date. The parties also stipulated that the partnership expenses incurred by Burch Street as of August 15, 2006 totaled $538,423. Grandmaison did not accept Plante's $500,000 offer and told Plante he would think about it for a while.
On August 15, 2006, Edgebrook transferred the steel to Gutierrez in exchange for the Merrimack properties. Pl.'s Am. Post-Trial Mem. 5. Edgebrook took title to the Merrimack properties. Three years later, on July 22, 2009, Edgebrook sold 50 percent of the property to Peter Nash, another developer. Edgebrook grossed $450,000 on the deal. In addition, Edgebrook earned half of $12,000 in timber proceeds from logging activities on the Merrimack properties.
Grandmaison's claim as to his share of partnership assets is twofold. First, he argues that under RSA 304-A:18 his "sweat equity" in arranging for the transport of the property should be considered as part of his contribution. Second, he asserts that Plante and Slattery violated their fiduciary obligations to him. Grandmaison argues that the "unilateral expulsion" from the partnership violated the appropriate standard of behavior for partners in a joint venture. Pl.'s...
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