In re Stacy

• Decision Date: 24 April 1989
• Docket Number: Civ. A. No. 88-0199-F.,Bankruptcy No. 87-40623-JFQ
• Citation: 99 BR 142
• Parties: In re John Michael STACY, III, Debtor. Appeal of Robert MAGNACCA, Richard Duncan and Thomas Parnell.
• Court: U.S. District Court — District of Massachusetts

99 B.R. 142 (1989)

In re John Michael STACY, III, Debtor.

Appeal of Robert MAGNACCA, Richard Duncan and Thomas Parnell.

Bankruptcy No. 87-40623-JFQ, Civ. A. No. 88-0199-F.

United States District Court, D. Massachusetts.

April 24, 1989.

Joseph A. Frank, West Springfield, Mass., and Michael Hassett, Keyes & Donnellan, Springfield, Mass., for appellants.

Harold B. Murphy, Hanify & King, Boston, Mass., and Maurice Cahillane, Egan, Flanagan & Egan, Springfield, Mass., for trustee and ComFed.

Mark Beglane, Bacon, Wilson, Ratner, Cohen, Salvage, Fitzgerald & Fialky, Springfield, Mass., for appellee, Lachowetz.

MEMORANDUM AND ORDER

FREEDMAN, Chief Judge.

I. INTRODUCTION AND BACKGROUND

As the facts of this case are labyrinthine, the Court will attempt to lay them out in some detail, as much for its own benefit as for the parties'.

A. The Debtor's Assets

On November 17, 1987, the debtor, John Michael Stacy, III ("Stacy"), filed a Voluntary Petition for Relief under Chapter 11 of Title 11 of the United States Code. Included in Stacy's assets at the time was part ownership in a parcel of property ("Parcel 1") and an option to buy a second parcel ("Parcel 2"). The two abutting parcels are known as 43-47 Cross Street, and are located in Chicopee, Massachusetts ("Chicopee"). The other ownership interest in Parcel 1 is held by Stephen Alban ("Alban"). ComFed Bank ("ComFed") holds a first mortgage on the first parcel and Tri-State Builders ("Tri-State"), owned by Anthony Lachowetz ("Lachowetz"), holds a second mortgage. Parcel 2, abutting the first, is owned by Lachowetz and is included in Stacy's proposed sale to Robert Magnacca, Richard Duncan and Thomas Parnell, the buyers and appellants in this action.

B. The Purchase and Sale Agreement

At a non-evidentiary hearing held at the Bankruptcy court on April 19, 1988, Lachowetz explained that the option held by Stacy to purchase Parcel 2 required completion of the construction of Cross Street and the construction of utilities before it may be exercised. The various parties then left the courtroom and returned shortly with a purchase and sale agreement, which was read into the record.

The major provisions were as follows: (1) Stacy, Alban and Lachowetz agreed to sell the two parcels to the appellants for $1,095,000, with $900,000 allocated to Parcel 1 and $195,000 to Parcel 2. (2) The sale of Parcel 1 was contingent upon approval by Chicopee for construction of seventeen condominium units. (3) The appellants' obligation to purchase was contingent upon their obtaining a mortgage for 80% of the purchase price. However, the contingency provision was limited to ten days; failure to exercise the contingency within that period would bind the appellants to the agreement. (4) The appellants were given the right to deed back Parcel 2 to Lachowetz if they were unable to obtain approval from Chicopee for construction of a 39-unit building on Parcel 2. (5) A unit in the building on Parcel 1, occupied by Lachowetz's son under a 99-year lease, was to be conveyed to him for one dollar. At the request of the Bankruptcy Court, all parties agreed to waive the Statute of Frauds.

C. The Alleged Breach

On April 29, 1988, the tenth day following the agreement, Chicopee Co-operative Bank ("Bank") gave the buyers a commitment to grant them a loan of $1,150,000, secured by a mortgage on both parcels. The amount of the loan would enable the buyers to purchase the property and complete the seventeen units located on Parcel 1. As a result of this commitment letter, the buyers did not exercise their right to withdraw under the financing contingency as set forth in condition (3), supra.

In a letter dated May 24, 1988 the buyers' attorney, Joseph A. Frank, Esq., informed the Bank that two potential title defects might affect the Bank's mortgage. First, a portion of Parcel 2 was taken by Chicopee in 1929 for failure to pay taxes. He suggested that the taking was suspect because Chicopee failed to give the owner statutorily prescribed notice of the taking.¹ Frank also stated that a second potential defect was the existence of the 99-year lease held by Lachowetz's son.

One week later, the Bank informed the buyers that it required "clear and marketable title," and declared that the title as it stood was unacceptable. The buyers then informed Stacy and Lachowetz that they were withdrawing from the agreement because of an inability to obtain clear title.

Following the buyers' failure to close the purchase and sale agreement on the agreed date, May 19, 1988, the trustee in bankruptcy, Stephen A. Darr ("Darr"), ComFed, Lachowetz and Tri-State filed a Joint Motion to Compel Performance of the Purchase and Sale Agreement ("Joint Motion"). The buyers filed an objection to the motion on July 1, 1988. Bankruptcy Judge Queenan held an evidentiary hearing on July 13, 1988 and, a week later, issued findings of fact and law, a portion of which is reproduced herein:

12. The Buyers\' real motive in seeking to avoid performance has nothing to do with the asserted title problems.

13. The normal title search in Hampden County extends back 50 years, or such additional period as is necessary to start with a warranty deed. Here that practice would extend the search back to the mid-1920\'s.

14. A title insurance policy could be purchased to cover the asserted title defect here, and would have been purchased by the Buyers in normal course. The asserted defect from the tax taking could also have been easily removed in a Land Court proceeding.

The court makes the following rulings of law:

1. The existence of a 99 year lease held by Lachowetz\'s son on one of the condominium units on Parcel 1 does not give the Buyers the right to assert rights under the provision of the agreement assuring them of "good, record and marketable title" for two reasons. First, they were already aware of the lease. Second, the lease would be terminated upon performance of the provision requiring conveyance of the unit to Lachowetz\'s son for one dollar.

2. Nor do the Buyers have the right to complain about the 1929 tax taking. The taking was not a defect in the first instance because notice was given to the owner of record as of the original assessment date. But even if the notice was improper and thus sufficient to otherwise prevent "good, record and marketable title," the defect has been cured by Mass. Gen.L. ch. 60, § 80C. This is exactly the type of problem the statute is designed to solve.

3. Even if the 1929 tax taking creates a defect of title which is not cured by Mass.Gen.L. ch. 60, § 80C, that defect does not prevent the Buyers obtaining "good, record and marketable title." The defect, if uncured by the statute, is de minimis in view of the fact that: (1) title insurance adequately covering it could have been purchased and in fact would have been purchased by the Buyers; and (2) the asserted defect could have easily been removed in a Land Court proceeding.

4. The parties are entitled to specific performance of the Buyers. See Olszewski v. Sardynski, 316 Mass. 715, 56 N.E. 2d 607 (1944).

In re John Michael Stacy, III, No. 87-40623-JFQ, slip op. at 5-6 (Bankr.D.Mass. July 20, 1988). On the same day, Judge Queenan issued a judgment ordering the buyers to pay the Trustee $875,000 plus interest and costs in return for a warranty deed of Parcel 1.² The buyers were also ordered to pay Lachowetz $195,000 plus interest and cost in return for a warranty deed to Parcel 2. On July 29, 1988, the buyers asked Judge Queenan to reconsider his decision, arguing that the July 13 hearing should have been adversarial, and that Judge Queenan made errors of both fact and law. In a handwritten note attached to the motion on August 9, 1988, Judge Queenan denied the motion without a hearing.

On the following day, the buyers filed a notice of appeal of the Bankruptcy Judge's opinion in this Court. On August 22, 1988, the buyers also filed a motion for a stay of the Bankruptcy Court's judgment pending appeal. This Court refused to issue a stay on September 2, 1988, noting that the buyers had failed to produce any evidence that they had complied with Bankruptcy Rule 8005, which requires that such motions be considered by the Bankruptcy Court first.

In a handwritten note dated September 13, 1988, Judge Queenan denied the buyers' motion for a stay "for failure to post adequate supersedeas bond and to establish likelihood of success on appeal." Later that month, on September 28, 1988, ComFed requested and the Bankruptcy Court issued an ex parte Amended Execution against the buyers in the amount of $875,000. Following the issue of the execution, a real estate attachment was levied against the property of the buyers. The buyers renewed their motion for a stay before the Bankruptcy Judge on October 5, who found no reason to alter his decision.

The buyers then returned to this Court on October 18, 1988 and resurrected their request for a stay. In an opinion dated November 10, 1988, this Court noted that the Trustee in bankruptcy had not opposed the buyers' request for a stay, and accordingly granted the stay of judgment pending appeal.

The next salvo in this multi-faceted battle was also fired by the buyers, who asked this Court on November 18, 1988, to recall the amended execution and to discharge the real estate attachment against their property. Three days later, the Trustee and ComFed requested permission to file opposition late against the buyers' request for a stay. This Court granted the request. The Trustee and ComFed also asked this Court to vacate the stay pending appeal. The Court has not ruled on that motion to date. On November 23, 1988, the Trustee and ComFed also filed an opposition to the buyers' motion to recall the execution and attachment.

On December 5, 1988, this Court received the buyers' brief in support of their appeal from Judge Queenan's decision, which was responded to by the Trustee and ComFed on January 30, 1989. Lachowetz and...