United States District Court, D. Massachusetts
For RFF Family Partnership, LP, Plaintiff (1:11-cv-10968-NMG), (1:14-cv-10065-NMG): Richard E. Briansky, LEAD ATTORNEY, Amy B. Hackett, McCarter & English, LLP, Boston, MA.
For Link Development, LLC, Defendant, Counter Claimant (1:11-cv-10968-NMG): Peter Francis Carr, II, Lawrence R. Kulig, Eckert Seamans Cherin & Mellott, LLC, Boston, MA.
Jeffrey B. Karll, Defendant (1:11-cv-10968-NMG), Pro se, Pawtucket, RI.
For Burns & Levinson LLP, Witness (1:11-cv-10968-NMG): Andrew R. Dennington, Erin K. Higgins, Conn, Kavanaugh, Rosenthal, Peisch & Ford, LLP, Boston, MA.
For RFF Family Partnership, LP, Counter Defendant (1:11-cv-10968-NMG): Richard E. Briansky, LEAD ATTORNEY, McCarter & English, LLP, Boston, MA.
For Link Development, LLC, Defendant, Cross Defendant, Cross Claimant, (1:14-cv-10065-NMG): Robert F. Daut, Needham, MA.
For Steven A. Ross, Individually and in his capacity as Trustee of BD Lending Trust, Defendant, Cross Claimant, Cross Defendant (1:14-cv-10065-NMG): James V. Marano, Jr., Kushner & Marano, P.C., Newton, MA.
MEMORANDUM & ORDER
Nathaniel M. Gorton, United States District Judge.
This protracted litigation involves contradictory mortgages recorded with respect to a 22-acre commercial property in Saugus, Massachusetts (" the Property" ). The conflict has spawned multiple lawsuits, including two in this Court. The prevailing controversy concerns a three-way dispute among Link Development, LLC (" Link" ), BD Lending Trust (" BD Lending" ) and RFF Family Partnership LP (" RFF" ) with respect to a 2012 settlement between RFF and BD Lending.
These convoluted cases have become intractable for several reasons:
1) BD Lending, caught between the prospect of significant tort liability to Link and the prospect of an uncertain resolution with RFF, entered into two settlement agreements, each conditioned, at least indirectly, upon some action of a third party;
2) while BD Lending intended to limit its obligation to Link to the amount it expected to receive from RFF, its agreement with Link neglected to reflect that intention and instead, it required a fixed payment; and
3) the parties have confirmed on several occasions, on the record and at oral argument, that BD Lending has no assets.
This litigation began in 2006 and has since included one bench trial, two federal lawsuits, at least two state court actions and two separate settlement agreements consummated on the eve of the respective trials in those actions.
Numerous motions are currently pending before this Court, including (1) RFF's motion for contempt against BD Lending based upon the latter's failure to comply with the terms of a settlement agreement in the 2011 Federal Case, (2) Link's motion to dismiss BD Lending's cross-claims against it in the 2014 Federal Case, (3) several cross-motions for summary judgment in the 2014 Federal case and (4) several discovery motions.
I. Factual Background and Procedural History
The facts and procedural history of this litigation are complicated and difficult to summarize in chronological order. In essence, all of the cases emanate from the unauthorized conveyance of a mortgage on the Property in 2006 by a subsequently disbarred attorney and the parties' efforts to sort out ownership of that real estate ever since.
A. The BD Lending Mortgage
In 2005, Link (a limited liability company) was formed by now-disbarred Attorney Stuart Sojcher (" Sojcher" ) on behalf of an investor to hold and develop the Property which the developer had acquired by foreclosure deed.
In September, 2006, Sojcher, without authorization of Link, executed a 30-day promissory note payable to BD Lending in the amount of $700,000 to be secured by a mortgage on the Property (" the BD Mortgage" ), then owned by Link. The individual defendant, Steven A. Ross (" Ross" ), is named as a party-defendant in his capacity as the Trustee of BD Lending and, with respect to certain claims, also in his individual capacity. The BD Mortgage was subsequently recorded in October, 2006. Attorney Sojcher continued to act without corporate authority and then absconded with most of the proceeds of the loan.
In November, 2006, after Link defaulted on the short-term loan which was secured by the BD Mortgage, BD Lending commenced initial foreclosure proceedings on the Property.
B. The 2006 Superior Court Case
In response to BD Lending's foreclosure proceedings, in December, 2006, Link filed a complaint against Attorney Sojcher and BD Lending in the Massachusetts Superior Court for Suffolk County (" the 2006 Superior Court Case" ), along with a parallel suit in Land Court, alleging, inter alia, " slander of title," fraud, conversion, civil conspiracy and violations of Chapter 93A. Link also sought a declaration that the BD Mortgage was void and that Sojcher was " not authorized to enter into any mortgage on behalf of [Link]." Link asserted that Attorney Sojcher had absconded with the proceeds of the loan made in connection with the BD Mortgage after Link had warned BD Lending that Attorney Sojcher lacked authority to execute the mortgage but that BD Lending had gone forward with the transaction anyway.
C. Subsequent Developments
While the Superior Court action was pending, in October, 2007, RFF loaned $1.4 million to Link (" the RFF Loan" ) in exchange for a " good" first mortgage on the Property (" the RFF Mortgage" ). As part of the loan agreement, Link represented, inter alia, that (1) the RFF Mortgage would be a " good first mortgage and not ... subject to any liens or encumbrances, whether inferior or superior" and (2) Link would not incur, assume, create or permit " any mortgage, pledge, lien, lease, encumbrance or charge" on the Property without the prior written consent of RFF.
In March, 2008, Link defaulted on the RFF Loan. Representatives of RFF and Link subsequently negotiated an extension of the maturity date of the RFF Loan until November, 2008, as well as incremental extensions thereafter. In March, 2010, however, RFF exercised its statutory power of sale under the RFF Mortgage, conducted a public auction and foreclosed the Mortgage. RFF, as the highest bidder, purchased the Property for $2.5 million.
D. The 2011 Federal Case
In June, 2011, RFF filed a complaint in this Court against BD Lending and Link (" the 2011 Federal Case" ), alleging that Link had defaulted on the loan, breached loan agreements and falsely represented that RFF had a legally valid and enforceable first lien on the Property. The complaint
also alleged that the BD Mortgage was fraudulently conveyed and therefore unenforceable. In various memoranda and orders, the Court characterized the dispute in the 2011 Federal Case as principally concerning damages owed by BD and Link to RFF and the amount of any surplus of such damages that RFF owed to other lienholders.
E. The 2012 Link Settlement
In June, 2012, just before the 2011 Federal Case was scheduled to go to trial, Link and BD Lending executed a written settlement agreement (" the 2012 Link Settlement" ) whereby Link dismissed its claims against BD Lending in the 2006 Superior Court Case and agreed to
waive all rights to contest the authenticity, enforceability, and/or legitimacy of the promissory note from Link to BD dated September 29, 2006... or the mortgage dated September 29, 2006 from Link to BD securing the BD Note.
In exchange, BD Lending agreed to pay Link $450,000 up front and $650,000 (or more) at a later date. (The amount of the supplemental payment was to increase by $50,000 for each year the debt remained outstanding.)
The Link Settlement contains two other provisions relevant here. First, it requires BD Lending to provide Link with an assignment of the BD Lending Mortgage (" the Assignment of Mortgage" ) to be (a) held in escrow pending satisfaction of BD Lending's obligations under the Link Settlement, (b) discharged upon satisfaction of such obligations but (c) recorded in the event of a default thereof. Second, BD Lending is required to provide Link with seven days notice before it discharges or transfers the BD Lending Mortgage.
F. The November, 2012 Trial of the 2011 Federal Case
On November 14, 2012, just before this Court commenced a bench trial in the 2011 Federal Case, RFF reported on the record that it had settled its claim against BD Lending but declined to put the terms of the settlement on the record because the parties desired that they remain confidential (" the 2012 RFF Settlement" ). BD Lending agreed, on the record, that the dispute had been resolved to the satisfaction of all parties.
Under the terms of the RFF Settlement (agreed upon November 13, 2012 but first disclosed to the Court at the filing of RFF's motion to enforce the settlement on March 22, 2013), BD Lending agreed to discharge its mortgage on the Property in exchange for a payment of $140,000 by RFF. As a result of the RFF Settlement, the Court dismissed BD Lending from the 2011 Federal Case and conducted the bench trial as a contest between RFF and Link with respect to the amount of money Link owed RFF at the time of the March, 2010 foreclosure sale.
On February 5, 2013, the Court entered a Memorandum of Decision finding (1) in favor of RFF on several of its claims for breach of contract but (2) that RFF had actually received a surplus in connection with its foreclosure sale.
Although RFF had initially sought a declaratory judgment of the invalidity of the BD Mortgage, that claim was not finally adjudicated as part of the 2011 Federal Case. At the summary judgment stage, the Court had ruled that Attorney Sojcher's unauthorized action might have later been ratified by Link's principal during a phone call in October, 2006 but that Sojcher did not, as a matter of law, have actual or apparent authority to execute the BD Mortgage.
The claim of invalidity of the 2006 BD Mortgage was withdrawn pursuant to the 2012 RFF Settlement, however, and therefore was not resolved by the Court. Indeed, the Court noted in its Memorandum of Decision that it did not make any " ...