MacDonald v. Hawker

• Decision Date: 27 May 1981
• Citation: 420 N.E.2d 923,11 Mass.App.Ct. 869
• Parties: Joseph W. MacDONALD v. Robert S. HAWKER. 1
• Court: Appeals Court of Massachusetts

Page 923

420 N.E.2d 923

11 Mass.App.Ct. 869

Joseph W. MacDONALD v. Robert S. HAWKER. ¹

Appeals Court of Massachusetts, Suffolk.

Argued Jan. 16, 1981.

Decided May 27, 1981.

Elizabeth Butler Heath, Boston, for defendant.

John F. Roy, Dorchester, for plaintiff.

Before ARMSTRONG, PERRETTA and KASS, JJ.

PERRETTA, Justice.

By this appeal we are asked to determine: (1) whether, as alleged by MacDonald in his complaint, Hawker's conveyance of realty for nominal consideration, followed immediately by his taking back title to the land, constituted a breach of his agreement to pay MacDonald a sum certain from the sale proceeds of the land which was to be sold for fair market value; and (2) whether Hawker sustained his burden of proving those damages which he alleged in his counterclaim that he suffered as a result of MacDonald's failure to keep his promise not to assist any of Hawker's partners in any grievance they might have as a result of their business dealings with him. We reverse that part of the judgment which is in MacDonald's favor on his complaint, and we affirm that portion dismissing Hawker's counterclaim.

The record before us contains the findings and rulings of the judge, Mass.R.Civ.P. 52(a), 365 Mass. 816 (1974), a transcript of the evidence, and numerous exhibits. From those findings, supplemented by portions of the evidence, we recite the facts.

In 1973, Hawker, a real estate developer, formed a limited partnership, P.G.P. Property Company (P.G.P.), in which he and two others, Robert McGlone and Barry Keene, were general as well as limited partners and George Trbovich was a limited partner. MacDonald became a limited partner shortly thereafter when he invested $10,000 in P.G.P. ² Consistent with the purpose of the partnership, which was to acquire, develop, and sell real estate, P.G.P. bought a subdivided tract of land known as Brookwood, in Hanover in 1973. Construction of houses on the lots began in 1974, but during that year, as well as in 1975, numerous delays occurred as Hawker wrestled with various regulations of the Hanover planning board, conservation commission, and board of health. According to Hawker's testimony, the partnership was beset by severe financial problems, and in order to generate a cash flow, he, as general partner, conveyed two of P.G.P.'s lots to himself and his wife. Whether Hawker's intention was honest is not here material. It is sufficient for us to relate only that the transaction prompted MacDonald, in April of 1975, to bring an action in the Superior Court for an accounting, alleging that the conveyance was illegal and that it constituted a fraud upon the limited partners. ³

That action terminated without a trial when the parties reached an agreement for settlement, MacDonald quit the partnership, and an agreement for judgment was entered on January 23, 1976, pursuant to Mass.R.Civ.P. 58, as amended, 371 Mass. 908 (1976). We set out the terms of the parties' obligations under the settlement agreement and the facts leading up to the allegations of breaches as they pertain to each of the parties' claims.

1. MacDonald's complaint. The pertinent terms of the agreement which control the outcome of the controversy presented on MacDonald's complaint describe Hawker's obligations to be:

"Within three (3) business days of the sale of each and every PGP Property Company lot of land located in the Brookwood subdivision, to pay the sum of $1,666.67 (to MacDonald) until $10,000 in the aggregate has been paid from said lot sale proceeds ... All sales of lots shall be made pursuant to the purchase and sale agreement with Robert A. Junior, or, if said sales are made to others, the price charged shall be fair market value." ⁴

On June 26, 1977, Hawker conveyed six of the Brookwood lots to his limited partner and father-in-law, Trbovich, and five to his "long time friend" Lawrence K. Trainor. The deeds to Trbovich and Trainor recite that those conveyances were made "in full consideration of One Dollar," or, as found by the judge, for "nominal consideration." Those deeds were recorded that same day, and, also on that day, Trbovich and Trainor conveyed the eleven lots back to the partnership. These deeds back, however, were not recorded until March 13, 1978. The conveyances to Trbovich and Trainor were made without notice to MacDonald, who nonetheless learned of them and commenced this action on November 21, 1977. Because the lots had been sold for less than fair market value and because he had not been paid within three days after the sales, or at all, MacDonald requested that the sales to Trbovich and Trainor be set aside as fraudulent, see G.L. c. 109A, §§ 1-13, and that he be awarded $10,000 for breach of the settlement agreement.

At trial, Hawker attempted to justify the transactions on the following basis. In May of 1977, the Hanover planning board published notice of its intention to amend its zoning by-law in such a fashion that Hawker, based upon the advice of his attorney, would be compelled either to "stagger" the record ownership of the lots so that no two contiguous lots would be owned by the same party or consolidate the eleven lots into seven, thereby losing four. See G.L. c. 40A, § 6, inserted by St. 1975, c. 808, § 3. See also Sturges v. Chilmark, --- Mass. ---, --- - ---, ^a 402 N.E.2d 1346 (1980); Lee v. Board of Appeals of Harwich, --- Mass.App. ---, --- n.4, ^b, 414 N.E.2d 619 (1981). ⁵

In considering whether those conveyances without subsequent payments to MacDonald constituted breaches of the agreement by Hawker, we bear in mind that "(i)t is to be presumed that parties employ all the provisions and phrases of a written contract with the purpose that each has an appropriate meaning. In interpreting contracts every word is to be given force so far as practicable. (Citations omitted.) All parts of an agreement are to be construed together as constituting a single and consistent arrangement. The intent of the parties must be gathered from a fair construction of the contract as a whole and not by special emphasis upon any one part." Crimmins & Pierce Co. v. Kidder Peabody Acceptance Corp., 282 Mass. 367, 375, 185 N.E.2d 383 (1933). See Ucello v. Cosentino, 354 Mass. 48, 51-52, 235 N.E.2d 44 (1968); Johnson v. Worcester Business Develop. Corp., 1 Mass.App. 527, 529, 302 N.E.2d 575 (1973). Moreover, in our consideration we are not bound by the judge's conclusions because the problem of interpretation of this contract is not affected by his findings of fact. Robert Indus., Inc. v. Spence, 362 Mass. 751, 755, 291 N.E.2d 407 (1973).

The terminology used by the parties is neither ambiguous nor complex, and it appears clear to us that Hawker and MacDonald intended that the latter would be paid the money due him from the proceeds received from the sales of the Brookwood lots. "The word 'sale' has a well defined meaning. It is the transfer of property from one person to another for a consideration of value. Howard v. Harris, 8 Allen 297, 299 (1864)." Arnold v. North American Chem. Co., 232 Mass. 196, 199, 122 N.E. 283 (1919). See also Osgood v. Tax Commr., 235 Mass. 88, 90-91, 126 N.E. 371 (1920); E. I. duPont de Nemours & Co. v. Kaufman & Chernick, Inc., 337 Mass. 216, 219-220, 148 N.E.2d 634 (1958). The consideration for a sale of these lots, as it relates to buyers other than Robert A. Junior, was set by the agreement at fair market value. "Fair market value is defined as 'the highest price which a hypothetical willing buyer would pay to a hypothetical willing seller in an assumed free and open market.' Epstein v. Boston Housing Authy., 317 Mass. 297, 299, 58 N.E.2d 135 (1944), quoting from Commissioner of Corps. & Taxn. v. Worcester County Trust, 305 Mass. 460, 462, 26 N.E.2d 305 (1940)." Correia v. New Bedford Redev. Authy., 375 Mass. 360, 361, 377 N.E.2d 909 (1978). See also American Fid. Co. v. Harney, 351 Mass. 163, 169-171, 217 N.E.2d 905 (1966) ("fair consideration" under G. L. c. 109A, §§ 3, 4); Mashpee Wampanoag Indian Tribal Council, Inc. v. Assessors of Mashpee, --- Mass. ---, ---, ^c 398 N.E.2d 724 (1980) ("fair cash valuation" under G. L. c. 59, § 38). Hawker's obligation was to pay MacDonald "from said lot sale proceeds," i. e., to pay MacDonald with "what is produced by or derived from (the sale) by way of total revenue." Webster's Third New International Dictionary (1971), defining "proceeds." Cf. G. L. c. 106, § 9-306(1), as appearing in St. 1979, c. 512, § 7. ⁶

Viewing the plain language and intent of the agreement with the substance and realities of the conveyances out by Hawker and the deeds back by Trbovich and Trainor, we conclude that those transactions were not sales which obligated Hawker to pay MacDonald in accordance with the agreement. Arnold v. North American Chem. Co., 232 Mass. at 199, 122 N.E. 283. Mills v. Mills, 4 Mass.App. 273, 277-278, 345 N.E.2d 915 (1976). Cf. Higgins v. Smith, 308 U.S. 473, 60 S.Ct. 355, 84 L.Ed. 406 (1940) (in determining tax consequences of transfer of assets, substance of a transaction and not its form controls); McElhinney v. Belsky, 165 Pa.Super. 546, 69 A.2d 178 (1949), and Whiteman & Co. v. Fidei, 176 Pa.Super. 142, 106 A.2d 644 (1954) (both looking to substance of conveyances to determine if sales within meaning of brokerage contracts had occurred). Keeping in mind, however, that the judge found and ruled that Hawker violated his agreement "to sell the remaining lots for fair market value in transferring title to Trbovich and Trainor for nominal consideration," the question next to be resolved is whether those conveyances, although not sales, affected MacDonald's rights under the agreement so as to give rise to a cause of action.

In light of the facts that Hawker did not give MacDonald notice of the transfers, that Hawker did not record the deeds from Trbovich and Trainor, and that Hawker had conveyed lots to himself and his wife in the past, we think that MacDonald reasonably could have...