Sommer v. Maharaj

• Decision Date: 13 June 2008
• Docket Number: SJC-09855
• Citation: 451 Mass. 615,888 N.E.2d 891
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court
• Parties: Scott E. SOMMER, executor,<SMALL><SUP>1</SUP></SMALL> v. Shantee MAHARAJ, executrix,<SMALL><SUP>2</SUP></SMALL> & another<SMALL><SUP>3</SUP></SMALL>; Vanguard Fiduciary Trust Company & others,<SMALL><SUP>4</SUP></SMALL> third-party defendants.

888 N.E.2d 891

451 Mass. 615

Scott E. SOMMER, executor,¹ v. Shantee MAHARAJ, executrix,² & another³; Vanguard Fiduciary Trust Company & others,⁴ third-party defendants.

SJC-09855

Supreme Judicial Court of Massachusetts, Middlesex.

Argued April 2, 2007.

Decided June 13, 2008.

Peter S. Brooks, Boston, for the plaintiff.

John C. Ottenberg, Boston, pro se.

John R. Baraniak, Jr., Boston, for Vanguard Fiduciary Trust & others.

John G.S. Flym for Shantee Maharaj, executrix.

Kristin Moody, Boston, for Dreyfus Founders Funds, Inc., was present but did not argue.

Present: GREANEY, IRELAND, SPINA, & CORDY, JJ.

CORDY, J.

Paul F. Sommer and D. Dev Monga were business associates with interests in two corporations controlled by Monga. Shantee Maharaj was Monga's wife and an employee of the corporations. In the breach of contract and fiduciary duty litigation (brought by Sommer against Monga and the corporations) underlying this case, a jury returned a verdict in favor of the plaintiff, Sommer, on June 7, 1991. What followed were years of contumacious conduct by the principal defendant at the time, Monga, in an effort to conceal assets and avoid paying the judgment. Seventeen years later, the litigation has survived both of their deaths.

The principal issue before the court is whether the defendant, Shantee Maharaj individually and as the executrix of the estate of Monga (decedent),⁵ has forfeited the right to contest the seizure and distribution of funds held in certain individual retirement accounts (IRA accounts) to satisfy the judgment entered against Monga in favor of Sommer. A Superior Court judge allowed the receiver, John C. Ottenberg, to access and distribute the IRA accounts without affording Maharaj the opportunity to contest, as she wished to, the seizure of the accounts, which may be protected by statute from the claims of creditors. On appeal, in 2006, the Appeals Court vacated the judgment insofar as it allowed the receiver to distribute the IRA assets. Sommer v. Maharaj, 65 Mass. App.Ct. 657, 669, 843 N.E.2d 649 (2006) (Sommer II). We granted the application for further appellate review of the receiver and the estate of Sommer and now affirm the judge's decision.⁶

1. Background. After receiving a judgment in the amount of $482,904, Sommer set about trying to enforce it.⁷ As part of that process, he sought and secured a permanent injunction prohibiting Monga and his business corporations from transferring or otherwise disposing of their assets. Maharaj was fully cognizant of that injunction. The injunction had little effect. As recounted in greater detail in prior decisions of both the Superior Court and the Appeals Court, Monga and Maharaj engaged in a seemingly endless series of actions to avoid paying the judgment.⁸ These actions included extensive commingling and diversion of the corporations' assets, and the concealment of hundreds of thousands of dollars of Monga's assets.⁹ They also included the harassment of third parties who had relevant financial information sought by Sommer, based on which a second injunction was entered against Monga.

We briefly recount the relevant facts and events that brought the case to its current posture.¹⁰ In June and July of 1992, a Superior Court judge entered two critical orders for the purpose of securing assets for the enforcement of the judgment. First, she found Monga in contempt for failing to provide discovery, and for transferring assets in violation of the permanent injunction entered after judgment. In light of Monga's failure to appear to answer on the contempt complaint, she also issued a capias for his arrest. Monga, who had left the jurisdiction, never purged himself of this contempt. Second, based on findings with respect to the conduct of Monga and Maharaj in diverting and concealing assets that ought otherwise be available to satisfy the judgment, the judge appointed a receiver. The receiver was directed to "collect, receive and take possession and charge of all [the] assets" of Monga and Maharaj. Monga and Maharaj were also ordered "to deliver to said receiver all the property, moneys, stock in trade and effects of every kind and nature ... in their ... possession or control, together with all books, deeds, documents, vouchers, and papers relating thereto." It is apparent from the record that neither Monga nor Maharaj delivered any property to the receiver, and, at least during the six years that preceded the receiver's filing of a motion for summary judgment on his amended substitute complaint (in July, 1998), never delivered any records either.

After identifying the IRA accounts, the receiver secured a court order directing that they be transferred to, and held and administered by, him until entitlement to the IRA assets was determined.¹¹ The companies managing the IRA accounts—Vanguard Fiduciary Trust Company; Vanguard/Morgan Growth Fund, Inc.; Dreyfus Founders Funds, Inc.; and Investors Fiduciary Trust Company (collectively, the fund defendants)—did not initially turn over the accounts to the receiver, in part because Monga threatened to sue them if they did so. The fund defendants did, however, freeze the accounts and, in 1995, in response to the receiver's complaint to effect turnover of the accounts, filed a counterclaim and a cross claim in interpleader, seeking to be relieved of liability for the accounts. Monga then sued the funds in Pennsylvania, setting off a complex series of proceedings in State and Federal courts in Pennsylvania and Massachusetts,¹² all of which appear to have been eventually dismissed.¹³

In January, 1994, Monga's appeal in the underlying breach of contract and fiduciary duty action was decided. The Appeals Court ordered that the appeal be dismissed unless, within sixty days of the issuance of the rescript, Monga surrendered on the outstanding capias and purged himself of contempt. Sommer v Monga, 35 Mass.App.Ct. 761, 765, 626 N.E.2d 16 (1994) (Sommer I). Monga failed to do so, and in June, 1994, an order of execution was issued pursuant to the underlying judgment. In light of the contempt, of which Monga had not purged himself, the sum of $100,000 was added to the judgment as penalty. On July 8, 1994, a Superior Court judge ordered all creditors to file proof of claims with the receiver by September 15, 1994. Monga appears to have filed three proofs of claim, one for "vacation pay," one for "Internal Revenue Taxes," and a third for "Legal Fees." Neither Monga nor Maharaj filed claims with respect to the IRA accounts which had been ordered turned over to the receiver, but which remained held by the fund defendants, albeit in a frozen state, due to the threat, by Monga, of litigation. As noted above, this threat was realized when the fund defendants sought interpleader relief.

After Monga passed away in 1996, Maharaj, the beneficiary of the IRA accounts, demanded that the fund defendants pay the IRA assets to her. The fund defendants refused, and the IRA accounts were ultimately ordered turned over to the receiver, and then disbursed as part of the receivership estate. The judge's order of October 8, 1998, which allowed the receiver's motion for summary judgment effecting the surrender of the funds to him, is the subject of this appeal.¹⁴

In ordering that the IRA accounts be transferred to the receiver and ultimately disbursed as part of the receivership estate, the judge refused to consider Maharaj's claim that the IRA assets were protected by statute from the claims of creditors, and therefore could not be reached to satisfy the judgment against Monga. The judge's basis for so doing was that Monga's continued defiance and flouting of court orders "stripped him of all right to assert claims of statutory exemption" for the IRA accounts. He had, in other words, forfeited his right to make any such claims by his continued disobedience. In the judge's view, Maharaj's claim to the IRA accounts, as the beneficiary, derived entirely from Monga. Because Monga had forfeited the right to retain them, nothing remained to pass to her on his death.

In reaching her decision, the judge relied in part on the Appeals Court's decision in Sommer I, supra at 761, 626 N.E.2d 16, in which the Appeals Court ultimately dismissed Monga's appeal from the underlying judgment against him on the basis of his flagrant disobedience of court orders. Because Monga had already, by the time his appeal was heard, disobeyed any number of court orders, was in contempt, and was subject to an outstanding capias for his arrest, the Appeals Court held that "[d]epriv[ing him] of the right to pursue an appeal" did not violate either due process or equal protection. Sommer I, supra at 765, 626 N.E.2d 16. The judge, in turn, similarly determined that Monga's, and Maharaj's, actions warranted depriving Maharaj of the right to assert any claims to the IRA assets. On appeal from that decision, however, the Appeals Court concluded that denying Maharaj's right to a hearing on the merits of her claim to the IRA assets, in reliance on the court's reasoning in Sommer I, was error. Sommer II, supra at 663, 843 N.E.2d 649. In the Appeals Court's view, the issues involving the IRA accounts were not before the court when it decided Sommer I. Further, as the court noted, the right to appeal differs from the right to a trial. Sommer II, supra at 662, 843 N.E.2d 649. The Appeals Court also rejected the fund defendants argument that the trial court has the inherent power to enforce its own orders and to enter a judgment against Maharaj, stating in a footnote that "[t]he cases appear to limit the sanction of default against a defendant to instances of truly egregious conduct...." Id. at 664 n. 12, 843 N.E.2d 649. The Appeals Court vacated the judge's order and judgment on receivership and remanded the case for further proceedings.

2. Discussion. We agree with the Appeals Court that the issue of the exempt status of the state IRA accounts was not specifically...