In re Ipswich Bituminous Concrete Products, Inc., Bankruptcy No. 86-10148-JNG

• Decision Date: 18 February 1988
• Docket Number: Adv. No. 86-1169.,Bankruptcy No. 86-10148-JNG
• Citation: 82 BR 661
• Parties: In re IPSWICH BITUMINOUS CONCRETE PRODUCTS, INC., Debtor. Harold P. MURPHY, Trustee, Plaintiff, v. Brian Jeffrey ROBINSON, Rita Robinson, Trustee of Ipsbit Realty Trust and Individually John Cavatorta, Alfred Aponas, Ipswich Savings Bank, Colonial Bank, Fairfield Group, Ltd., Spruce Mountain Development Corporation, and Samian Home Builders, Inc., Defendants.
• Court: U.S. Bankruptcy Court — District of Massachusetts

82 B.R. 661 (1988)

In re IPSWICH BITUMINOUS CONCRETE PRODUCTS, INC., Debtor Harold P. MURPHY, Trustee, Plaintiff, v. Brian Jeffrey ROBINSON, Rita Robinson, Trustee of Ipsbit Realty Trust and Individually John Cavatorta, Alfred Aponas, Ipswich Savings Bank, Colonial Bank, Fairfield Group, Ltd., Spruce Mountain Development Corporation, and Samian Home Builders, Inc., Defendants.

Bankruptcy No. 86-10148-JNG, Adv. No. 86-1169.

United States Bankruptcy Court, D. Massachusetts.

February 18, 1988.

Joan N. Feeney, Hanify & King, Boston, Mass., for plaintiff.

William Sheehan, Pearl, McNiff, Crean, Cook & Sheehan, Peabody, Mass., for defendants.

MEMORANDUM

JAMES N. GABRIEL, Chief Judge.

INTRODUCTION

On November 2, 1987, 79 B.R. 511, this Court entered judgments with respect to Counts 4, 5, 7, 8, 9, 10, 16, 17, 18, 20, 22, and 26 of the Trustee's 29 count complaint against two of the above named nine defendants, namely John Cavatorta and Alfred Aponas. Additionally, in the opinion that accompanied those judgments, the Court explained the disposition of Counts 1, 2, 3, 6, 11, 12, 13, 14, 15, 19, 21, 23, 24, 25, and 27 against Rita Robinson, individually and as Trustee of Ipsbit Realty Trust, Brian J. Robinson ("Robinson"), the Ipswich Savings Bank, the Fairfield Group Ltd. ("Fairfield") and the Colonial Bank. The remaining two counts, Counts 28 and 29, are now before the Court. However, Counts 21, 24 and 27 must be considered to fully understand Count 28 against Samian Home Builders, Inc. ("Samian") and Count 29 against Spruce Mountain Development Corp. ("Spruce" or "Spruce Mountain").

In Counts 21 and 27 the Trustee, pursuant to 11 U.S.C. § 548 (West 1987), alleges that Fairfield, received a fraudulent transfer of the Debtor's rights to property in New Hampshire. Through Count 24, the Trustee seeks to reach and apply Robinson's shares of stock in Fairfield. In Counts 28 and 29, the Trustee, pursuant to 11 U.S.C. § 550 (West 1987), seeks to recover from Samian and Spruce Mountain as either immediate or mediate transferees of Fairfield the value of the Debtor's interest in the New Hampshire property. Samian and Spruce Mountain filed an answer in which they deny the material allegations of Counts 28 and 29 and assert affirmative defenses. The Court heard the Trustee's case against Samian and Spruce Mountain on February 24, 1987 and June 23, 1987.

As was explained in the earlier opinion, the Trustee obtained a default judgment against Fairfield on October 24, 1986 and entered into a Stipulation for Judgment with Robinson on February 24, 1987. That stipulation has yet to be approved by the Court.¹ In pertinent part, the Stipulation contemplates the assignment by Robinson to the Trustee of his stock in Fairfield and all his rights, claims and causes of action against Fairfield, its shareholders, officers and directors, the New Hampshire property, Samian and Spruce Mountain. The Stipulation, as will become clear, is integral to the Trustee's attempt to recover from Samian and Spruce Mountain.

FACTS

The facts, though complicated, are not disputed seriously. As this Court found in its earlier opinion, and as was established by the Trustee in the instant proceeding, the Debtor was incorporated as a Massachusetts corporation on March 27, 1984. Its stated purpose was to purchase, sell, and install bituminous concrete products and to carry on "any business permitted by the laws of the Commonwealth." Robinson, Alfred Aponas ("Aponas") and John Cavatorta ("Cavatorta") were officers and directors, and each held one third of the outstanding shares of common stock. On April 4, 1984, the principals of the Debtor purchased the assets of a concrete business from James Brady for $410,000, using borrowed funds. The Debtor commenced operations immediately. Robinson, the president, was responsible for handling the books, preparing bids on construction projects and collecting accounts receivable. Aponas, the vice-president, and Cavatorta, the treasurer, were responsible for work in the field.

In the late summer or fall of 1984, Robinson, Cavatorta and Aponas met with David Stern, the Debtor's clerk and corporate attorney, to discuss corporate activities during the Debtor's slow season, the period between December and April when weather conditions prevented the Debtor from undertaking extensive paving work. During those discussions, Robinson broached the possibility of purchasing development property in New Hampshire. Indeed, he testified that he took Aponas and Cavatorta to New Hampshire on several occasions to inspect parcels of land there. In October of 1984, Robinson, Cavatorta and Aponas decided to buy the Spruce Mountain property, a 146 acre parcel of land on Carter Notch Road in Jackson, New Hampshire. The land was and still is undeveloped except for a rustic resort lodge and three log cabins. Robinson, Cavatorta and Aponas intended a corporation to be known as the Fairfield Group to take title to the Spruce Mountain property and oversee its development as a resort and condominium complex. However, on October 18, 1984, Robinson, on behalf of the Debtor, not Fairfield, executed a purchase and sale agreement with Henry Jablecki and others. The agreement provided for a purchase price of $300,000 and a deposit of $25,000. The Debtor paid the $25,000 deposit in two installments. The deposit was held by Griebbel, Wason & Jones, a real estate brokerage firm in North Conway, New Hampshire.

The sales agreement contained a provision concerning liquidated damages. Specifically, the agreement provided: "If the BUYER shall default in the performance of his obligation under this agreement, the amount of the deposit may, at the option of the SELLER, become the property of the SELLER as reasonable liquidated damages." In an addendum to the sales agreement, the Debtor and the sellers agreed that the sale was subject to five conditions: 1) the Debtor's ability to obtain bank financing in the amount of $175,000; 2) the sellers' agreement to provide secondary financing for $50,000; 3) the Debtor's ability to obtain a construction loan for 25 dwellings and a new lodge; 4) the Debtor's ability to obtain, at its sole expense, State Water Pollution and Control Commission and Town of Jackson Planning Board approvals for the construction and operation of 50 dwelling units and a 30 bedroom lodge; and 5) the parties' ability to close within 30 days of the granting of all state, local and bank approvals or by April 1, 1985.

The Debtor engaged the services of an achitect, an engineer and several attorneys and disbursed substantial sums for materials in an effort to prepare the site and obtain necessary zoning board approvals. However, even after the expenditure of $26,242.08, the Debtor was unable to obtain the requisite governmental approvals and permits. Nevertheless, Robinson was determined to proceed with the sale and, as president of the Debtor, extended the purchase and sale agreement on February 11, 1985 until May 1, 1985, on May 29, 1985 until August 15, 1985, and on July 19, 1985 until September 15, 1985. Robinson obtained the extensions in the absence of corporate votes in favor of the them. Furthermore, he obtained the July extension at a time when he knew Cavatorta and Aponas were no longer in favor of purchasing the New Hampshire property.

In late August of 1985, Robinson contacted Mike and Chris Stasinos, father and son real estate developers, for whom the Debtor had performed paving work. Robinson testified that he told both Chris and Mike Stasinos about the deposit and development expenditures and gave them, or at least Mike Stasinos, a development package containing the sales agreement that named the Debtor as the buyer of the Spruce Mountain property. Mike and Chris Stasinos eventually agreed to participate in the purchase and development of the property. Additionally, they agreed that the $175,000 in financing necessary to purchase the property would be secured by a first mortgage on the property and that a New Hampshire corporation would be formed to take title to the property. Accordingly, Chris Stasinos, Mike Stasinos and Robinson retained Peter G. Hastings, an attorney from Fryeburg, Maine, to incorporate Fairfield as a New Hampshire corporation. Each received one-third of the outstanding shares of Fairfield when it was formed on September 11, 1985 to take title to the Spruce Mountain property. The three stockholders constituted the board of directors of Fairfield. Robinson was president; Mike Stasinos was treasurer.

The Stasinos' also engaged the services of a Salem, Massachusetts attorney, George P. Vallis. They gave him a copy of the sales agreement for the New Hampshire property and instructed him to examine the record title to Robinson's home, as Robinson also had discussed borrowing substantial sums of money from Mike Stasinos. Attorney Vallis discovered that Robinson had insufficient equity in his personal residence to secure the loan. Nevertheless, on September 13, 1985, Robinson executed a promissory note for $50,000 to Mike Stasinos in which he waived notice, demand and protest. The note was payable in two years, at an annual rate of interest of 18%, with monthly interest payable in the amount of $750 on the 13th of each month. On the same day, Robinson assigned all his shares in Fairfield to Mike Stasinos as security for the note, although the parties did not note the assignment on the reverse side of Robinsons' stock certificate. Mike Stasinos, or Attorney Vallis, took possession of Robinson's stock certificate for 500 shares of Fairfield and the stock assignment. Attorney Vallis presented Robinson with a check made payable to the Boston law firm of Brown, Rudnick, Freed and Gesmer in the amount of $50,000, having previously obtained that sum from Mike Stasinos. Robinson subsequently asked Vallis for a replacement check which he had certified and then used to redeem the stock held by Cavatorta and Aponas in the...