Our Lady of the Sea Corp. v. Borges

• Citation: 40 Mass.App.Ct. 484,665 N.E.2d 128
• Decision Date: 29 May 1996
• Docket Number: No. 94-P-231,94-P-231
• Parties: OUR LADY OF THE SEA CORPORATION & others 1 v. Joao P. BORGES.
• Court: Appeals Court of Massachusetts

Page 128

665 N.E.2d 128

40 Mass.App.Ct. 484

OUR LADY OF THE SEA CORPORATION & others ¹ v. Joao P. BORGES.

No. 94-P-231.

Appeals Court of Massachusetts Essex.

Argued Jan. 17, 1996.

Decided May 29, 1996.

William D. Gardiner, Boston, for defendant.

Thomas J. Flannagan (Patrick J. Riley, with him), Boston, for plaintiffs.

Before BROWN, KAPLAN and LAURENCE, JJ.

BROWN, Justice.

The Our Lady of the Sea Corporation (OLSC) was formed by four individuals interested in purchasing and operating a commercial fishing vessel out of the Gloucester area. Two of the parties, the brothers Antonio and John Pata, claimed that Joao Borges, their partner and the captain of the vessel, secretly misappropriated large amounts of the vessel's catch and fuel rebates (corporate assets) and defaulted on five separate loan agreements made in connection with the fishing venture and an unrelated venture. In his counterclaim, Borges demanded an accounting of the corporate assets, damages for his improper ouster from the corporation, and payment on a promissory note given him by OLSC.

The action was tried jury-waived in the Superior Court. ² The judge found for OLSC on the misappropriation claims, awarding damages in the amount of $396,591.50; for John Pata on the claim seeking collection on a note in the amount of $12,500; for Antonio Pata for $7,500, on the claim seeking collection on a note in the amount of $12,500 (minus a $5,000 payment); for Borges on John Pata's demand for the return of $5,000 loaned by oral agreement; for Borges on the Patas' claims seeking collection on two notes in the amount of $7,500 given with respect to an unrelated venture; and for the defendants in counterclaim. ³

The judge issued a comprehensive decision to accompany her order for judgment. The relevant facts are taken from the parties' stipulation of facts and from the judge's findings of fact.

Interested in forming a commercial fishing venture, the Patas, neither of whom had any experience in the business, approached Borges, a skilled fishing captain. Together with a fourth individual, the parties agreed to construct and manage a vessel, which they called Our Lady of the Sea.

To finance the venture, each of the four original shareholders of OLSC contributed $25,000 toward the venture, putting $5,000 in for stock and taking a $20,000 note back. Because he did not have the capital for the shareholder's contribution, Borges borrowed $12,500 from each of the Pata brothers, executing promissory notes dated March 1, 1979, to Antonio and April 5, 1979, to John. The shareholders personally guaranteed the bank loan taken out by OLSC for the purchase of the vessel, securing the loan with mortgages on their homes.

In connection with an unrelated fishing venture, Borges subsequently borrowed $7,500 from each brother, executing notes on June 30, 1979.

As part of a buy-out deal with the fourth stockholder in July, 1982, Borges lent the corporation $20,000 to buy back that shareholder's stock. Borges had borrowed the $20,000 from Ocean Crest Seafoods, Inc. (Ocean Crest), a company that regularly purchased its fish from OLSC. At this point, Borges and the Patas each owned one-third of the stock in the corporation.

On October 3, 1983, each shareholder lent an additional $20,000 to OLSC. On January 4, 1984, Borges made a partial payment to Antonio Pata in the amount of $5,000 toward his $12,500 obligation, promising to repay both brothers the full amount borrowed.

Our Lady of the Sea embarked upon its maiden voyage on September 10, 1979. During the time that Borges was captain of the vessel, it would dock after each fishing trip longshoremen would unload and separate the fish by species; and employees of Ocean Crest would weigh the fish, fill out a tally sheet, and multiply the weight of each species by the market rate to determine how much was owed. As wages, the longshoremen and crew received a percentage of the value of the catch based upon the weight and species; and, in accordance with industry practice, Borges received a ten-percent captain's share of the revenue in addition to his crew share. After deductions were taken for wages, any remaining amount represented OLSC's income.

Not satisfied with his share, Borges secretly arranged with the management of Ocean Crest to skim a certain amount of fish from the total catch on each trip. Ocean Crest agreed to divert the fish for Borges's benefit in exchange for a twenty-percent reduction in the market price of the fish. The scheme worked in this manner. As the vessel pulled in with its catch, Borges or his brother Manny would give a signal to Louis Mitchell, an employee of Ocean Crest, to keep a second tally of fish on a separate card. Borges was credited with or paid from $3,000 to $5,000 for each trip.

From September, 1982, to August, 1984, for instance, Ocean Crest credited Borges with payments of $17,325.00 toward the $20,000 he had borrowed from the company in July, 1982. ⁴

In 1984 or 1985, the Pata brothers began to suspect that Borges was stealing from them. The longshoremen complained to the Patas that they seemed to be unloading more fish than they were paid for and than appeared on the final fish-tally. On two occasions, unbeknownst to Borges, the Patas conducted independent tallies of the catch, and the total was more than the amount credited to OLSC. On October 9, 1986, Borges was injured during a fishing trip and never again served as the captain of Our Lady of the Sea. ⁵

In total, Borges served as the captain on 123 trips. During Borges's tenure as captain, Rose's Oil Service, the company from which OLSC purchased fuel, discounted each gallon of the 551,830 gallons of fuel purchased by five or ten cents. On conflicting evidence, the judge found that Borges retained the rebates for himself instead of returning them to OLSC.

On February 4, 1987, at a special meeting of OLSC's directors, the Patas voted to remove Borges from his position as officer and director of OLSC.

1. Damages.

a. Fish misappropriation. The judge awarded damages in the amount of $369,000 for the misappropriation of fish. Borges argues that this amount is speculative and the product of guesswork, as there was no evidence of the amount, type, and value of the fish allegedly taken. There is no merit to this argument.

A party may recover for lost profits as long as the value of those profits may be determined, as a practical matter, with a fair degree of certainty. Novel Iron Works, Inc. v. Wexler Constr. Co., 26 Mass.App.Ct. 401, 412, 528 N.E.2d 142 (1988). The amount of lost profits may be ascertained by reference to some definite standard, either of market value, established experience, or direct inference from known circumstances. Ibid.

Under our well established rules of damages, the amount of damages need not be proved with mathematical precision; the extent of damages often must be left to estimate and judgment. See Dalton v. Demos Bros. Gen. Contractors, Inc., 334 Mass. 377, 379, 135 N.E.2d 646 (1956). A tortfeasor may not complain that damages cannot be ascertained with precision when his wrongdoing caused the uncertainty. McKenna v. Begin, 5 Mass.App.Ct. 304, 311, 362 N.E.2d 548 (1977).

Here, there was overwhelming evidence of Borges's scheme to steal fish from OLSC, his partners, the crew, and the longshoremen. There was evidence that fish were stolen after each trip from September, 1979, to October, 1986; that Ocean Crest was the exclusive fish purchaser during this time; that the skipper's card was paid off "down back"; that Ocean Crest's fish-tallier Louis Mitchell was paid $25.00 per trip to "keep [his] mouth shut"; that everything was done in secret; and that Borges's personal tally sheets were probably destroyed. Borges, therefore, is ultimately responsible for the plaintiffs' inability to calculate damages with precision at this point.

In fashioning a damage award from the conflicting evidence, the judge particularly relied upon the testimony of Mitchell, the tallier present on the docks during the unloading process and probably the person best able to gauge how much fish was stolen. According to Mitchell, the amount and type of fish recorded on Borges's personal card depended on the amount and type of fish caught; Borges was paid twenty percent less than market price for "his" fish; on less successful trips, at least 3,000 pounds of fish were diverted, while on good trips 5,000 to 6,000 pounds were diverted; and Borges and his cohorts chose "big-money" fish such as haddock, which sold for $1.50 per pound at the time. Mitchell, who had significant experience as a fish counter, testified that his estimate of the amount stolen was "not a guess."

The judge estimated that Borges stole $3,000 worth of fish on each of the 123 fishing trips, for a total of $369,000 worth of converted fish. Although the judge's method of calculation is not apparent on the face of the record, she could have reached the figure of $3,000 by taking the market price of haddock ($1.50), subtracting the twenty-percent discount ($1.50 - .30 = $1.20), and multiplying that by 2,500 pounds of fish, or she could have taken the average of the market price of a "premium fish" such as haddock ($1.50) and a lower priced fish such as pollack ($.50 a pound), or $1.00 a pound, and multiplied that by the minimum average weight of the fish stolen per trip (3,000 pounds). Regardless of methodology, the result reached was a fair estimate supported by the evidence. The plaintiffs have proved their loss with reasonable certainty. ⁶ See Agoos Leather Cos. v. American & Foreign Ins. Co., 342 Mass. 603, 608, 174 N.E.2d 652 (1961).

b. Fuel rebates. The judge awarded $27,591.50 to the plaintiff corporation, calculated by multiplying the undisputed number of gallons purchased during Borges's employment (551,830) by the lower (conservative) amount of the rebate per gallon (five cents), rather than the higher figure of ten cents per gallon....