R & W Realty, Inc. v. Cacciola

• Decision Date: 23 September 2011
• Docket Number: MICV201003615.
• Court: Massachusetts Superior Court
• Parties: R & W REALTY, INC. et al. v. David CACCIOLA, Sr. et al.[1]

R & W REALTY, INC. et al. v. David CACCIOLA, Sr. et al.^[1]

No. MICV201003615.

Superior Court of Massachusetts, Middlesex County.

September 23, 2011

MEMORANDUM AND ORDER ON PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT

THOMAS E. CONNOLLY, J.

I. INTRODUCTION

Plaintiff Corporations, R & W Realty, Inc. (" R & W" ) and Environ Realty Corp. (" Environ" ), Plaintiff and Defendant-in-Counterclaim RoseAnne S. Rankin (" Rankin" ), and Defendant-in-Counterclaim, Raymond DeSimone, submit a Motion for Summary Judgment against Defendant and Plaintiff-in-Counterclaim, David Cacciola, Sr. (" David, Sr." ), and Defendants, David Cacciola, Jr. (" David, Jr." ) and Jonathan H. Cacciola (" Jonathan" ), over the ownership of the two Plaintiff Corporations. Plaintiffs' Motion for Summary Judgment is DENIED for the following reasons.

II. BACKGROUND ^[2]

David, Sr., unable to meet creditor obligations in the mid-1970s, formed two corporations to protect his assets. R & W and Environ were respectively established in 1974 and 1975 under the ostensible ownership of Rankin, David, Sr.'s daughter and Plaintiff in this case. Between the dates of corporate formation and 2010, David, Sr. transferred property into R & W and Environ as a means to disguise his worth and to deceive his creditors, three former wives, and the Internal Revenue Service (" IRS" ).^[3] IRS forms filed throughout this period on behalf of R & W and Environ have repeatedly identified Rankin, and none of the Defendants, as 100% stockholder of said corporations, or have been left blank. Meanwhile, as recently as 2010, David, Sr. and his son, David, Jr., made financial withdrawals from the corporations; in less than three years (from November 12, 2007 to August 12, 2010) the two withdrew a combined amount of $273,413. See Ex. GG, Vol. II.

Though Rankin's exact position with regard to R & W and Environ is a matter of dispute, both parties recognize her professional involvement in the corporations' business affairs. Defendants claim that she provided secretarial and administrative support but that at no point was she the intended legal shareholder. Rankin, according to Defendants, merely held all the property and money as a " straw" to protect David, Sr. from his creditors, bankruptcy filings, his wife's claims against him in their divorce proceedings, and others to whom he might owe money. The Defendants also claim that Rankin always intended to transfer the shares back to her father. Rankin, on the other hand, denies that her role was so specific and limited. She claims that she created R & W and Environ for her father at a time when he was struggling financially and that she has managed the business of the corporations ever since. Indeed, annual filings with the Secretary of the Commonwealth for both R & W and Environ list Rankin as the director, president, and treasurer, as well as the sole stockholder, since corporate inception. See Ex. A, Vol. I.

For a period of many years, David, Sr. repeatedly and successfully asserted and testified in numerous judicial proceedings that he owned no interest in R & W and Environ, and that Rankin held all the stock in both corporations in her own name. David, Sr. did not list any interest in either of the Plaintiff corporations at his personal bankruptcy filings in 1977, his divorce actions in 1982-1983, 1994, and 1995 or legal disputes with his brother in 2003. No question of fact persists as to Rankin's knowledge of David, Sr .'s transfer of property to R & W and Environ or his denial of corporate ownership in various legal proceedings and testimonies.

In 1993, Rankin fell into financial difficulty and similarly filed for bankruptcy. In that proceeding, Rankin submitted to the Court a financial statement in which she also denied any stock ownership in R & W or Environ. See Ex. EE, Vol. II.

Rankin filed a declaratory judgment action on September 23, 2010 against the Defendants, seeking a legal finding that she is the President, Treasurer, Secretary, and Sole Director of R & W and Environ.^[4] Shortly thereafter, on October 15, 2010, David, Sr. filed a counterclaim, alleging, in part, that he is the sole shareholder of the two corporations.^[5] In her Motion for Summary Judgment, Rankin seeks to have the dispute resolved as a matter of law by invoking the equitable doctrine of judicial estoppel.

III. DISCUSSION

A. The Parties' Legal Positions

Plaintiffs seek to establish that the Defendants are precluded from claiming ownership of R & W and Environ due to the doctrine of judicial estoppel. They contend that the positions taken by David, Sr., David, Jr. and Jonathan are, in fact, exactly the opposite to the positions which David, Sr. successfully asserted in prior litigation, sworn testimony, affidavits, and bankruptcy filings. The Plaintiffs further contend that David, Sr. has manipulated the judicial system by inconsistently attributing and asserting ownership of the corporations under oath. They claim that the proof of such action invokes the equitable doctrine of judicial estoppel, and thereby prevents the Defendants from establishing the ownership they so claim.

Defendants, on the other hand, seek to establish that Rankin cannot assert such an equitable doctrine in these circumstances. David, Sr. indicates that he was successful in accomplishing fraud to his financial betterment but that Rankin does not legally own any stock of R & W and Environ outright. The Defendants claim and have offered proof by affidavit that David, Sr. never intended for Rankin to own the two corporations, but that she instead assisted her father's attempt to hide his assets until he made demand for the books and records in September 10, 2010. Moreover, the Defendants argue that Rankin should not obtain Summary Judgment due to her prior conduct and assertions with regard to the ownership of the corporations. Under the doctrine of " unclean hands," the Defendants claim that Rankin's complicity in her father's fraud as well as previous denial of ownership in either R & W or Environ at her own bankruptcy proceedings estops her from asserting any equitable doctrines related to this matter.

B. Application of Law

Summary Judgment is a " device to make possible the prompt disposition of controversies on their merits without trial, if in essence there is no real dispute as to the salient facts or if only a question of law is involved." Cassesso v. Comm'r of Corr., 390 Mass. 419, 422, 456 N.E.2d 1123 (1983), quoting Community Nat'l Bank v. Dawes, 369 Mass. 550, 553, 340 N.E.2d 877 (1976). Summary Judgment is granted when there is no genuine issue of material fact and the Summary Judgment record entitles the moving party to judgment as a matter of law. Mass.R.Civ.P. 56(c); Cassesso, 390 Mass. at 422, 456 N.E.2d 1123. The moving party bears the burden of affirmatively demonstrating the absence of a triable issue and that the Summary Judgment record entitles it to judgment as a matter of law. Pederson v. Time, Inc., 404 Mass. 14, 17, 532 N.E.2d 1211 (1989). Once the moving party establishes the absence of a triable issue, the burden shifts to the nonmoving party to respond by " set [ting] forth specific facts showing that there is a genuine issue for trial." Mass.R.Civ.P. 56(e); Kourouvacilis v. Gen. Motors, 410 Mass. 706, 716, 575 N.E.2d 734 (1991).

Normally, in this case, there would be sufficient evidence to defeat the Plaintiffs' Motion for Summary Judgment, since there are genuine issues of material fact. However, the Plaintiffs' arguments are not based on the absence of genuine issue of material fact, but rather on the application of the law, the equitable doctrine of judicial estoppel. Therefore, this Court will consider whether the doctrine of judicial estoppel applies to these circumstances.

" Judicial estoppel is an equitable doctrine that precludes a party from asserting a position in one legal proceeding that is contrary to a position it had previously asserted in another proceeding." Otis v. Arbella Mutual Ins. Co., 443 Mass. 634, 639-40, 824 N.E.2d 23 (2005), quoting Blanchette v. School Comm. of Westwood, 427 Mass. 176, 184, 692 N.E.2d 21 (1998). The doctrine serves to " prevent the manipulation of the judicial process by the litigants." Id. at 640, 692 N.E.2d 21, quoting Canavan's Case, 432 Mass. 304, 308, 733 N.E.2d 1042 (2000). See New Hampshire v. Maine, 532 U.S. 742, 750-51, 121 S.Ct. 1808, 149 L.Ed.2d 968 (2001); Otis, 443 Mass. at 640, 824 N.E.2d 23. " [T]he broad purpose of the doctrine is to protect the integrity of the judicial system and parties who play ‘ fast and loose’ with that system by means of any device, be it testimony under oath or arguments asserted by their counsel, may be subject to judicial estoppel." Id. at 646, 824 N.E.2d 23; Rutledge v. Chaprales, 27 Mass. L. Rptr. 220, (June 18, 2010, Fremont-Smith, J .). Due to its equitable nature, judicial estoppel is not defined by " inflexible prerequisites or an exhaustive formula." See New Hampshire, 532 U.S. at 750-51. Rather, the doctrine is properly invoked " whenever a party is seeking to use the judicial process in an inconsistent way that courts should not tolerate." Id. at 751, quoting East Cambridge Sav. Bank v. Wheeler, 422 Mass. 621, 623, 664 N.E.2d 446 (1996); see also Martin v. Heimlich, 2007 WL 2429702, 2007 Mass.Super. LEXIS 324, (August 9, 2007, Billings, J.) (finding that a party, having represented in Bankruptcy Court that property was sold outright, may not presently claim to have retained a secret interest in that property).

A successful claim of judicial estoppel generally necessitates the showing of at least two widely recognized elements: (1) that " the position being asserted ... is directly contrary to the position previously asserted" and (2) that " the party...