Tocci v. Tocci, SJC-13180

CourtUnited States State Supreme Judicial Court of Massachusetts
Writing for the CourtGAZIANO, J.
PartiesJOHN L. TOCCI & another [1] v. MICHAEL J. TOCCI & others. [2]
Docket NumberSJC-13180
Decision Date17 June 2022

JOHN L. TOCCI & another [1]
v.

MICHAEL J. TOCCI & others.
[2]

No. SJC-13180

Supreme Judicial Court of Massachusetts, Middlesex

June 17, 2022


Heard: February 4, 2022.

Civil action commenced in the Superior Court Department on April 4, 2014. The case was tried before Helene Kazanjian, J., and posttrial motions were heard by her.

The Supreme Judicial Court granted an application for direct appellate review.

Gavin G. McCarthy for Tocci Corporation & another.

Michael J. Tocci, pro se.

Bradley L. Croft for the plaintiffs.

Present: Budd, C.J., Gaziano, Lowy, Kafker, Wendlandt, & Georges, JJ.

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GAZIANO, J.

This case arises out of a protracted dispute between family members in a closely held corporation over asserted conversions of corporate funds. The corporation and one of its shareholders brought suit against an officer, claiming that the officer diverted money from the corporation for the benefit of himself and his individually owned corporation. The jury found that the officer violated his fiduciary duties to the corporation and converted the corporation's assets for his own benefit, ultimately awarding $1 million in damages to the corporation. The corporation appealed, and the shareholder and the officer cross-appealed, each claiming error in the course of the jury trial, as well as in the judge's decisions on posttrial motions for additur, surcharge, and a new trial.

In addressing the parties' claims, we must confront the novel question whether a successful plaintiff in an action for a breach of fiduciary duty may recover its attorney's fees through the use of surcharge, an equitable remedy that holds a fiduciary personally liable for the fiscal impact of his or her breach. We conclude that surcharge may be used to award a plaintiff fiduciary the costs of attorney's fees, where the plaintiff brings the litigation on behalf of a separate entity or common fund, and not where the litigation directly benefits only the

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plaintiff. Accordingly, because the corporation here brought the action for its own benefit, the judge did not err in denying the plaintiff's request for surcharge. After carefully considering the parties' remaining arguments, we discern no error and therefore affirm the jury's verdict, the trial judge's decisions on the motions in limine during the jury trial, and the decisions on the posttrial motions for additur, surcharge, and a new trial.

1. Background.

a. Facts.

We recite the facts the jury could have found, reserving certain facts for later discussion. Tocci Corporation (TC), a closely held, family-owned construction company, was founded in 1975 by Valentino Tocci.[3]Valentino's sons, John Tocci, Michael Tocci, and William Tocci, each received a one-third ownership interest in the company and were appointed to its board of directors.[4] Valentino eventually turned over full control to John, who was named as chief executive officer. Michael and William intermittently performed work for the company as clerk and laborer, respectively. John directed his brothers' work and determined their salaries.

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Sometime in the 1980s, John began to express frustration with TC's ownership arrangement. John felt that it was unfair that Michael and William had the same ownership interest as he did even though he performed the bulk of the work. John's frustrations came to a head at a family meeting in 1984, when he threatened to leave TC unless he was given full ownership. The meeting did not result in any changes in ownership, but, rather, dissipated after Michael announced his intention to attend law school so that he could return to the company with another useful skill.

While Michael attended law school and William worked as a laborer, John continued to run the day-to-day operations of the business. In 1984, John paid himself a $500, 000 bonus in addition to his $36, 669 salary. At that time, the bonus was not disclosed to Michael or William, nor did they receive any distributions.

At some point prior to 1987, John started a separate construction company called Tocci Building Corporation, of which he was the sole owner. Not long thereafter, John purportedly borrowed $131, 475 from TC to pay the mortgage on his home. He later allegedly transferred $45, 750 from TC to Tocci Building Corporation.

John eventually decided to stop bidding on new construction contracts for TC and began to wind down the corporation's

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ongoing affairs, although it continued to exist on paper to pursue litigation pertaining to one of its prior jobs, referred to as the Park West litigation. That matter settled in 1991 for $2.55 million, netting TC approximately $1.25 million after legal fees, although John told Michael and William that the settlement "was a wash." John then distributed approximately $1.1 million of the settlement award to Tocci Building Corporation. According to John, the payment from the settlement proceeds was to reimburse Tocci Building Corporation for resources it expended supporting TC throughout the course of the Park West litigation, as well as payments it had made to subcontractors on TC's behalf.

In 1993, John asked Michael to backdate a document stating that Michael had approved the settlement prior to its acceptance in 1991, in order to "satisfy some 'bean counters'" who were auditing the settlement. Michael refused, but he instead offered to provide John with a deed of transfer, which purported to transfer his entire interest in TC to John. John assured Michael that the document would have no legal effect, and Michael believed that he was simply "helping his brother out of a jam."

With Michael's deed of transfer in hand, and the Park West litigation concluded, in 1995, John unilaterally dissolved TC. He then distributed TC's remaining assets, worth approximately

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$69, 192, to Tocci Building Corporation, without consulting Michael or William. Michael and William were unaware that TC had been dissolved until 2013, when Michael spontaneously conducted a search through the Commonwealth's corporate record system. Michael then announced his intent to revive the company, which spurred the instant litigation.

b. Procedural background.

In 2014, John filed a complaint against Michael in the Superior Court, seeking to enjoin him from reviving TC. The complaint asserted that, as a result of the deed of transfer, Michael no longer had any interest in the company. In his opposition, Michael contested the validity of the deed of transfer and also raised a number of counterclaims against John, including claims for breach of fiduciary duty, conversion, and unjust enrichment. Michael and William ultimately were able to revive TC in 2016; TC then intervened in the litigation, asserting similar claims against John.[5]

Because many of the claims against John would be precluded if the deed of transfer had been effective, the parties moved to bifurcate the trial. They agreed that first a jury-waived trial

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would be conducted on the sole issue whether the deed of transfer had eliminated Michael's interest in TC. The remaining issues, if any, then would be tried before a jury.

The judge who presided over the first trial issued a written decision finding that the deed of transfer was fraudulently induced and therefore voidable; accordingly, Michael's and TC's claims would be able to proceed. Most of Michael's claims were duplicative of TC's claims, and therefore would be resolved implicitly by the jury's decision on TC's claims. After a hearing at which Michael agreed that his claims were subsumed by the corporation's, TC became the sole plaintiff at the jury trial, and Michael reserved additional equitable claims that were personal to him for the court to resolve following the jury's verdict.

The claims before the jury were based on five alleged conversions of corporate assets: the $500, 000 bonus; the $131, 475 loan; the $1.1 million settlement payment; the $45, 750 transfer to Tocci Building Corporation; and the $69, 192 dissolution distribution. The jury were asked to decide (1) whether the claims were brought within the applicable statute of limitations; (2) whether John committed a breach of his fiduciary duties to TC; (3) whether John unlawfully converted money or property from TC; (4) the amount of harm suffered by TC as a result of John's misconduct, if any; and

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(5) the amount of unjust enrichment enjoyed by John as a result of his misconduct, if any. The jury heard testimony from each of the Tocci brothers, as well as expert testimony on executive compensation and corporate valuation. Among other evidence, many of TC's financial records and some of John's tax returns were introduced in evidence.

The jury concluded that the claims were timely commenced, and that John had committed a breach of his fiduciary duties and had engaged in unlawful conversion. They determined that TC suffered $1 million in harm, but found that John did not obtain any unjust enrichment. TC and William appealed, and John and Michael cross-appealed. We subsequently granted TC and William's application for direct appellate review.

2. Discussion.

The parties assert multiple errors, all arising out of rulings at or after the jury trial. TC contends that the second judge erred in declining to provide the jury with a comprehensive list of each of the factual findings in the first judge's decision following the jury-waived trial. John argues that TC failed to satisfy its burden of proving that its claims were timely commenced, and therefore the judge should have granted his motions for a directed verdict on the statute of limitations issue. TC also maintains that the judge erred in denying two of its posttrial motions. First, TC contends that the judge should have granted its motion for additur because the

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jury's award was unreasonable. Second, with respect to the corporation's claims, the judge made an error of law when she...

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