Noonan v. Wonderland Greyhound Park Realty Llc.

• Decision Date: 08 July 2010
• Docket Number: Civil Action No. 09-10723-MBB.
• Parties: E. Mark NOONAN, Plaintiff, v. WONDERLAND GREYHOUND PARK REALTY LLC, Wonderland Parking, Inc., Anglo Irish Bank Corporation, PLC, Wonderland Greyhound Park, Inc., The Westwood Group, Inc., Sterling Suffolk Racecourse, LLC, Coastal Development Massachusetts, LLC, Richard P. Dalton and Charles E. Sarkis, Defendants.
• Court: U.S. District Court — District of Massachusetts

723 F.Supp.2d 298

E. Mark NOONAN, Plaintiff,

v.WONDERLAND GREYHOUND PARK REALTY LLC, Wonderland Parking, Inc., Anglo Irish Bank Corporation, PLC, Wonderland Greyhound Park, Inc., The Westwood Group, Inc., Sterling Suffolk Racecourse, LLC, Coastal Development Massachusetts, LLC, Richard P. Dalton and Charles E. Sarkis, Defendants.

Civil Action No. 09-10723-MBB.

United States District Court,D. Massachusetts.

July 8, 2010.

COPYRIGHT MATERIAL OMITTED.

Sean T. Carnathan, Tara J. Myslinski, O'Connor, Carnathan and Mack LLC, Burlington, MA, for Plaintiff.

Beth L. Jacobson, Patrick P. Dinardo, Sullivan & Worcester, LLP, Brian M. Hurley, Jesse W. Abair, Rackemann, Sawyer & Brewster, Deborah S. Griffin, Holland & Knight, LLP, Bruce E. Falby, Bruce S. Barnett, DLA Piper LLP (US), Boston, MA, for Defendants.

MEMORANDUM AND ORDER RE: CERTAIN DEFENDANTS' CROSS-MOTION FOR SUMMARY JUDGMENT (DOCKET ENTRY # 35); PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT (DOCKET ENTRY # 25); MOTION OF ANGLO IRISH BANK CORPORATION, PLC TO DISMISS (DOCKET ENTRY # 55); COUNT XI DEFENDANTS' MOTION TO DISMISS COUNT XI OF THE VERIFIED COMPLAINT AND FOR COSTS (DOCKET ENTRY # 63); PLAINTIFF'S SECOND MOTION FOR PARTIAL SUMMARY JUDGMENT (DOCKET ENTRY # 96)

BOWLER, United States Magistrate Judge.

Pending before this court are the following dispositive motions: (1) a motion to dismiss (Docket Entry # 55) filed by defendant Anglo Irish Bank Corporation, PLC (“Anglo”); ¹ (2) a motion for partial summary judgment (Docket Entry # 25) filed by plaintiff E. Mark Noonan (“Noonan”); (3) a cross motion for summary judgment (Docket Entry # 35) filed by defendants Wonderland Greyhound Park Realty LLC (“Realty”), Wonderland Parking, Inc. (“Wonderland Parking”), Wonderland Greyhound Park, Inc. (“Greyhound Park”), the Westwood Group, Inc. (“Westwood”), Richard P. Dalton (“Dalton”) and Charles F. Sarkis (“Sarkis”) (collectively “the Wonderland defendants”), Sterling Suffolk Racecourse, LLC (“SSR”) and Coastal Development Massachusetts, LLC (“Coastal”); ² (4) a motion to dismiss Count XI and for costs (Docket Entry # 63) filed by Greyhound Park, Dalton and Sarkis; and (5) a second motion for partial summary judgment filed by Noonan (Docket Entry # 96). After conducting a hearing on the first four motions, this court took those motions (Docket Entry # # 25, 35, 55 & 63) under advisement. The second motion for partial summary judgment (Docket Entry # 96) is based upon events subsequent to the verified complaint and also ripe for review.

PROCEDURAL BACKGROUND

The present real estate dispute arises out of amendments, advances and changes made to various loan documents on the part of Anglo, a first or senior mortgagee, and/or Realty, a borrower and mortgagor of property located in Revere, Massachusetts. Noonan holds a second mortgage and note on the property. Among Noonan's primary complaints are Realty's failure to pay the amount due on the second mortgage and the second promissory note on the September 12, 2007 maturity date; Anglo's $1,000,000 increase to the principal of the first mortgage and the first promissory note in August 2006; Anglo's amendments to the terms of the first mortgage and the first promissory note without Noonan's consent at various times; and the issuance of property purchase and note purchase options to Coastal and Sarkis in 2008 in contravention of Noonan's option to purchase loan documents. Noonan maintains there were a number of events of default which entitled him to bring this suit and purchase the loan documents. Absent a continuing event of default under the first mortgage, Noonan also asserts his entitlement to payment in full at maturity on September 12, 2007. To date, Noonan has not received any payments.

The verified complaint sets out the following counts: (1) declaratory relief against all defendants (Count I); (2) breach of contract against Realty for failure to pay the principal, interest and associated charges on the maturity date of the second mortgage or thereafter (Count II); (3) breach of contract, in particular, covenants in paragraphs 16 and 17 of the second mortgage, against Realty (Count III); (4) breach of contract, in particular, an intercreditor agreement, against Anglo (Count IV); (5) breach of the implied covenant of good faith and fair dealing in the second mortgage and the intercreditor agreement against Realty and Anglo (Count V); (6) appointment of a receiver and an order to marshal and preserve the assets of Realty, Wonderland Parking and Greyhound Park in order to pay Noonan (Count VI); (7) reach and apply against Wonderland Parking and Greyhound Park (Count VII); (8) reach and apply against Westwood (Count VIII); (9) reach and apply against Coastal and SSR (Count IX); (10) equitable subordination of advances Anglo made to Realty without Noonan's consent (Count X); (11) breach of fiduciary duty on the part of Greyhound Park, Dalton and Sarkis (Count XI); (12) impairment of Noonan's security interest by increasing the principal in the first promissory note and amending the loan to value ratio of the first mortgage against Realty and Anglo (Count XII); (13) intentional interference with the second mortgage and the second promissory note by Anglo (Count XIII); (14) intentional interference with the intercreditor agreement by Realty (Count XIV); (15) intentional interference with the second mortgage, the second promissory note and the intercreditor agreement by Westwood (Count XV); (16) violations of Massachusetts General Laws chapter 93A (“chapter 93A”) against Realty, Westwood and Anglo (Count XVI); and (17) an accounting against Realty, Wonderland Parking and Greyhound Park (Count XVII).

After the December 2008 filing of the verified complaint, certain events transpired that led to the exercise and transfer of the property purchase and loan purchase options in February 2010. These subsequent events are the subject of the second summary judgment motion.

FACTUAL BACKGROUND ³

The only asset of Realty, a wholly owned subsidiary of Westwood, consists of approximately 34 acres of property in Revere (“the property”). Greyhound Park leases a portion of the property to operate a greyhound dog racing track. ⁴ Wonderland Parking leases a different portion of the property upon which it operates a commuter parking lot.

In the middle of 2005, the Wonderland defendants sought financing to pay off existing mortgage loans and obtain funding for approximately two years of working capital. An internal Anglo document as well as an April 2005 appraisal commissioned by Dalton, President and Chief Executive Officer of Westwood, reflects the property's value in the range of $14,400,000 to $17,300,000 as of March 29, 2005. A July 2005 credit committee application to Anglo from Realty denotes the purpose as refinancing existing debt and funding “operating shortfalls pending the sale of the property.” ⁵ (Docket Entry # 25, Ex. 2). An internal summary of the deal attached to the application demonstrates that Anglo agreed to refinance existing debt and cover operating shortfalls up to a 60% maximum loan to value ratio with Sarkis to cover other losses. ⁶

The summary characterizes the commuter parking lot as the “biggest revenue driver.” (Docket Entry # 25, Ex. 2). From 2005 to November 2009 when Massachusetts abolished greyhound dog racing, the greyhound dog racing track suffered yearly operating losses. In contrast, the commuter parking lot averaged annual revenues of approximately $550,000 during the past several years.

A. The Original Loan Documents

As a result of Realty's efforts, on September 12, 2005, Realty granted a first mortgage on the property to Anglo and its successors and assigns (“the first mortgage”) to secure payment of an $8,820,000 loan evidenced by a promissory note (“the first loan” or “the first promissory note”) between Realty, the borrower or mortgagor, and Anglo, the lender or mortgagee. Under an Advance/Holdback Letter (“the holdback agreement”) dated September 12, 2005, with Realty, Anglo agreed to disburse an initial advance of $7,350,000 and, subject to Anglo's discretion and various terms, the remaining sum of $1,470,000 one year later. Sarkis executed a guaranty to Anglo individually guaranteeing Realty's prompt payment of the $8,820,000 loan (“the guaranty”). Under the guaranty, Sarkis agreed inter alia to pay the costs and expenses of Realty, including interest payments, taxes and insurance, in the event Realty did not make the payments. (Docket Entry # 25, Ex. 9, ¶ 1(b)).

Realty granted a Second Mortgage and Security and Fixture Financing Statement (“the second mortgage”) on the property to Noonan. The second mortgage secured payment of a $3,929,000 loan evidenced by a second mortgage note (“the second loan” or the “second promissory note”) between Realty, again as borrower or mortgagor, and Noonan, the payee or mortgagee. Realty executed the first mortgage and the first promissory note (collectively “the senior loan documents”) and the second mortgage and the second promissory note (collectively “the subordinate loan documents”) on the same day, September 12, 2005. Sarkis, a previous client with a preexisting relationship with Anglo, likewise executed the guaranty on September 12, 2005. Also on September 12, 2005, Anglo, as senior lender, Noonan, as subordinate lender, and Realty, as borrower, entered into an Intercreditor and Subordination Agreement (“the ICA”) subordinating Noonan's right of payment under the subordinate loan documents to Anglo's right of payment under the senior loan documents. ⁷

1. The ICA

The terms of the first and second mortgages and concomitant promissory notes together with the terms of the ICA provide the basis to examine the disputed transactions and amendments to the loan documents. Turning first to the ICA, which is the only document executed by Realty, Anglo and Noonan, it begins with a recitation of certain facts. First, the agreement...